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Resources and Global Integration: The Worst of Both Worlds

/ Jim Sojourner / Leave a comment

Spices, minerals, oil, human bodies: The very blessings that have underpinned the global system of economics and trade for centuries are, for the countries that have them in abundance, a curse. In fact, those countries’ existence as a source of exploitable resources has been, and continues to be, the greatest constraint on the progress of developing countries incorporated into the global economy. For too many resource-rich countries, the result of that incorporation and exploitation has been forced dependence, extracted wealth, twisted institutions, slavery and servitude, and finally, enduring underdevelopment and poverty.

Colonialism to Dual Economies

According to Theotonio Dos Santos, national dependence and exploitation has come in three varieties: 1) a colonial dependence where “commercial and financial capital in an alliance with the colonialist state dominated the economic relations of the Europeans and the colonies by means of a trade monopoly complemented by a colonial monopoly of land, mines, and manpower,” 2) financial-industrial dependence “which consolidated itself at the end of the 19th century, characterized by the domination of big capital in the hegemonic centers, and its expansion abroad through investment in the production of raw materials and agricultural products for consumption in the hegemonic centers,” and 3) a new dependence that “has been consolidated based on multinational corporations which began to invest in industries geared to the internal market of underdeveloped countries.”[1] Each of these varieties of exploitation has allowed rich, developed nations to grow richer by taking advantage of less developed countries while subsequently limiting those countries’ longer-term prospects.

Dos Santos’s systems of exploitation find their roots in the 17th century, as Europe’s empires spread out across the world, groping for new markets to dominate. The colonial system forms Dos Santos’s first variety of dependence and laid much of the foundation for the ongoing underdevelopment and exploitation that continues to this day.

Beginning in 1602, the Dutch in Southeast Asia began establishing a monopoly over the spices grown throughout the region.[2] To achieve their goals, they cajoled, threatened, and even massacred native populations to gain control of their spice wealth for export back to Europe.[3] The Dutch cleared whole islands of native peoples and set up their own enduring extractive political and economic institutions to exploit the spices trade via a plantation system.[4] It was hugely successful. “By the end of the 17th century,” write Daron Acemoglu and James Robinson, “the Dutch had reduced the world supply of these spices by about 60 percent and the price of nutmeg had doubled.”[5] But the Dutch exploitation of Southeast Asia had an even more long-lasting, pernicious effect: To protect themselves, the kingdoms of the region chose to turn inward, cutting their thriving regional economic and cultural networks and becoming more absolutist in their governance. [6] It crushed budding economic and political development. “Dutch colonialism fundamentally changed their economic and political development … In the next two centuries they would be in no position to take advantage of the innovations that would spring up in the industrial revolution.”[7]

A similar story unfolded in the Caribbean, where Europeans hoping to profit off sugar cane set up a plantation system requiring mass exploitation of labor.[8] That labor being unavailable locally, the Europeans turned instead to Africa. The trans-Atlantic slave trade grew from about 300,000 slaves in the 16th century to 1,350,000 in the 17th and 6,000,000 in the 18th.[9] In all, some 10,000,000 slaves where shipped out of Africa, extracting the human resources of one place to fuel the agricultural resource extraction of another place and having lasting consequences for each.[10]  Laws and institutions were distorted to serve the slave trade, and warfare invigorated by the slaving industry disrupted the family structure, changed local customs, and decimated the population. [11] The would reverberate into the late 20th century.

The abolition of slavery – which in any case lingered well into the 20th century – did not bring an end to the resource-based exploitation, and after slavery came “legitimate commerce” including palm oil, ivory, rubber, and gum arabic.[12] With the demand for slaves forcibly diminished, Africans were instead put to work on African plantations so that “the abolition of the slave trade, rather than making slavery wither away, simply led to the redeployment of slaves, who were now used in Africa rather than the Americas.”[13]

One key example of this is South Africa, a haven for freed slaves who had begun to develop their own institutions and agricultural industry.[14] This budding development, however, did not appeal to the Europeans. To begin with, competition with African farmers drove down the price of crops for European farmers.[15] But more importantly, it deprived South Africa’s lucrative diamond and gold mines of the cheap labor necessary to maximize their profitability. The colonial government had an answer: In 1913, South Africa passed the Native Lands Act, giving Europeans, which made up 20 percent of South Africa’s population, 87 percent of the land.[16] Africans were forced off their farms onto lands too small to be productive, diminishing their ability to compete on the agricultural market and forcing them instead to enter  the labor market en masse, driving down the price of labor for the foreign owned mines.[17] Africans abandoned the institutions and technologies they’d adopted, reversing 50 years of development, all while providing the Europeans with the labor needed to extract South Africa’s resource wealth for foreign profit.[18] “The dispossession of African farmers led to their mass impoverishment. It created not only the institutional foundations of a backward economy, but the poor people to stock it.”[19] This system would mutate into South Africa’s apartheid regime, as opportunities for African property ownership and labor specialization were further legally curtailed. The result was an example of a durable dual economy, both domestic and international, represented by Dos Santos’s second variety of dependence, where poor, traditional peripheries produced the raw materials and agricultural products for consumption in the finance-rich hegemonic centers.[20]

So, from the beginning of the 17th century to the beginning of the 20th, the natural resources of places like Southeast Asia, the Americas, and Africa cursed the peoples and nations in those places to suffer from exploitation due to their incorporation in the global economy. It halted or reversed development and created the intuitions, integration, and circumstances that would enable future exploitation. As Acemoglu and Robinson summarize, “the profitability of European colonial empires was often built on the destruction of independent polities and indigenous economies around the world, or on the creation of extractive institutions from the ground up.”[21]

Modern Exploitation

The collapse of colonial empires did not mean an end to resource-based extraction to feed the global economy. According to Giovanni Arrighi, after the processes of decolonization in the 1950s and 1960s, the GDP of sub-Saharan Africa stood at 17.6 percent of world GDP; by 1995 it had dropped to 10.5 percent.[22] Up until 1975, Africa had not performed much worse than the world as a whole and better than some parts of the developing and developed world.[23] Through the early 1970s, an excess of global liquidity meant that loan capital flowed into developing regions, including sub-Saharan Africa.[24] But that growth collapsed in the late 1970s.[25] And regardless, even in the best-performing developing countries growth had fallen short of expectations and did little or nothing to alleviate poverty or improve the general welfare for much of the population.[26] The reasons for these failures are manifold.

First, per Dos Santos’s third variety of dependence, in the post-war period the export-based economies of the developing world became dependent on foreign capital and commodity markets.[27] On the international market, raw materials tend to be cheap, while industrial inputs required for production are expensive, so developing countries had rely on foreign capital debt and aid to “[fill] up the holes they themselves created”.[28] Foreign capital, then, built the industrial structure of developing economies in the mid-20th century, while either reinvesting or remitting its profits out of the country. It “[created] very few jobs in comparison to population growth and [limited] new sources of income,” retarding the growth of a domestic consumer market.[29]

Second, this bad situation grew worse in the 1970s when the United States reversed its polices of the 1950s and 60s that made America a major source for global liquidity and direct investment, becoming instead the world’s main debtor nation and largest recipient of foreign capital.[30] That redirection of capital flows back into America “reflated demand and investment in North America, while deflating it in the rest of the world … Since competitive pressures had become particularly intense in manufacturing industries, these imported goods tended to be industrial rather than agricultural products.”[31] For Asian countries with a large labor pool able to manufacture cheap industrial products for export to America, this reversal sparked the Asian economic miracle.[32] Africa, however, had its historical legacy to contend with: the depopulation of the continent caused by the slave trade left most areas with low population density and small local markets able to produce mainly agricultural products.[33] In this new economic reality, sub-Saharan Africans, with their historical legacy of extraction-based institutions, could no longer realistically compete on the integrated global market.

The natural resource mirage seemed to offer a way out of this trap. It has been only another curse. The discovery of oil in sub-Saharan Africa seemed to portend an economic boom for the region as foreign investment has flowed into these countries to exploit their oil reserves.[34] Rather than improving the economic situation of general populations, however, the wealth promised by oil often redirects capital investment toward oil-related industries, crowding out other sectors that might grow into more sustainable, consumer-based industries, in addition to causing currency appreciation, which undercuts exports.[35] Rents from oil displace taxation as the primary source of government revenue, so for the profits that are not remitted abroad or reinvested, political elites have the incentives to focus on private accumulation of wealth and limit its distribution to their personal political networks.[36] “The result is that oil states generate not public goods for development but private and political goods instead … [The elites] have little reason to use this public treasure to deliver roads, schools, fertilizers, clinics, medicine, and so on.”[37]

This has been the case in Angola, Nigeria, and Sudan,[38] but the case in point is Equatorial Guinea: “Home to over one billion barrels of oil reserves, Equatorial Guinea has exported as many as 400,000 barrels of oil a day since 1995, a bonanza that has made the country wealthier, in terms of GDP per capita, than France, Japan, and the United Kingdom. Little of this wealth, however, has helped the vast majority of Equatorial Guinea’s 700,000 people: today, three out of every four Equatorial Guineans live on less than $2 a day, and infant mortality rates in the country have barely budged since oil was first discovered there.”[39]

From colonialism to the modern capitalist global market, the extraction of resources for the integrated global market has left developing countries stunted and poor. The exploitation of those resources, from spice to labor to oil, has been the primary constraint on developing countries from history to the modern day.

[1] Theotonio Dos Santos (1970). The Structure of Dependence. In Mitchell Seligson and John Passé-Smith (eds.). Development and Underdevelopment: The Political Economy of Global Inequality, 3rd ed. Boulder, Colo: Lynne Rienner Publishers, 2003, pp. 232.
[2] Daron Acemoglu and James Robinson (2012). “Reversing Development” (Chapter 9) in Why Nations Fail: Origins of Power, Poverty and Prosperity (New York: Crown Business), 247.
[3] Ibid, 248
[4] Ibid, 248-249.
[5] Ibid, 249.
[6] Ibid, 249.
[7] Ibid, 250.
[8] Ibid, 251.
[9] Ibid, 251.
[10] Ibid, 251.
[11] Ibid, 253-255.
[12] Ibid, 256.
[13] Ibid, 257.
[14] Ibid, 262-264.
[15] Ibid, 265.
[16] Ibid, 265.
[17] Ibid, 267.
[18] Acemoglu and James Robinson, 267.
[19] Ibid, 268.
[20] Dos Santos, 232.
[21] Acemoglu and Robinson, 271.
[22] Giovanni Arrighi (2002). The African Crisis: World Systemic and Regional Aspects. New Left Review 15 (May-June), 1.
[23] Ibid, 16.
[24] Ibid, 18.
[25] Ibid, 16.
[26] Ibid, 20.
[27] Dos Santos, 233.
[28] Ibid, 233.
[29] Ibid, 234-235.
[30] Arrighi, 21-22.
[31] Ibid, 23.
[32] Ibid, 24.
[33] Ibid, 25.
[34] Larry Diamond and Jack Mosbacher (2013). Petroleum to the People: Africa’s Coming Resource Curse – and How to Avoid It. Foreign Affairs 92: 87.
[35] Katrina Burgess (2019). Natural Resources. Lecture, at the Fletcher School of Law and Diplomacy. February 11, 2019.
[36] Diamond and Mosbacher, 90.
[37] Ibid, 90.
[38] Ibid, 88.
[39] Ibid, 86-87.

Dangerous Waters: Reassessing Conflict in the South China Sea

/ Jim Sojourner / Leave a comment

These days, all is not smooth sailing in the South China Sea. Despite violence throughout Asia during the decades-long Cold War, the South China Sea remained calm. But starting in 2010, with the rapid economic and military rise of China and the United States’ so-called “pivot to Asia,” the waters that lap the shores of China, Vietnam, Thailand, Malaysia, Indonesia, Brunei, and Taiwan have grown choppy. From harsh words to physical confrontations, the situation is tense. In response, some conventional discourse today argues that China’s aggressive pursuit of territorial control in the South China Sea results from a Chinese long-game desire to replace the United States as the sole hegemonic power, first in the region, then in the world.[1] Many also argue America should – indeed must – adopt a confrontational approach in the South China Sea, empower its small allies and partners in the region, squash Chinese ambitions, and protect American interests and prestige—even if it leads to war.[2]

Those interpretations and policy approaches are incorrect and dangerous. First, China’s expansion of power and development in the South China Sea should not be seen primarily as an outward-looking attempt to usurp global U.S. power but rather, as V.I. Lenin would have it, part of an ongoing, inward-looking attempt by China’s leaders to find an outlet for excess domestic capital. The countries that rim the South China Sea, along with other nations around the world that form links of China’s amorphous and ever-ballooning Belt and Road Initiative (BRI), form major outlets for the over-productive forces at work within China. For China, military development in the South China Sea guarantees protection of the trade and investments necessitated by internal economic pressure. It does not advance revisionist designs for global domination. China worries unless it can solve the structural problems that plague its economy, economic crisis could destabilize the communist regime.

Nevertheless, the growing power and prestige that enable China’s imperialist projects in Southeast Asia signal a growing disequilibrium in the world. Concerned U.S. policymakers, instead of falling for the popular, incomplete, and misleading “Thucydides Trap” analysis,[3] should turn to Robert Gilpin’s theory of hegemonic transition and war for a more complete understanding of the international forces at work in the South China Sea. While a great power sea change does seem to be occurring in Asia, the United States can avoid hegemonic war there by understanding Gilpin’s thesis and pursuing a careful policy of appeasement and accommodation in the South China Sea. To do otherwise could be disastrous for the global stability.

These dual reexaminations of the situation in the South China Sea could calm the waters there and avoid a capsizing of both American and Chinese power.

Nature and Scope

The 1.4-million-square-mile South China Sea is some of the most important maritime territory on planet Earth. More than $3.3 trillion of trade sailed through its island-speckled waters in 2016, as well as 40 percent of the world’s global liquified natural gas. Beneath waters sit an additional 190 trillion cubic feet of natural gas and 11 billion barrels of untapped oil, according to the Council on Foreign Relations. [4] Bilateral trade between China and Association of Southeast Asian Nations (ASEAN), meanwhile, hit $514.8 billion in 2017, up 13.8 percent on the year, continuing a trend of rising trade between China and its neighbors around the South China Sea. Of that, Chinese exports accounted for $279.1 billion, 9 percent growth year-over-year, for a Chinese trade surplus with ASEAN of $43.4 billion in 2017.[5] Twenty-one of China’s 39 maritime trade routes and 60 percent of its trade passes by the South China Sea’s contested Spratly Islands, claimed by China, Malaysia, the Philippines, and Vietnam. [6] Tellingly, as of Spring 2018, the Spratlys are home to Chinese missile systems.[7]

Adding to the South China Sea’s economic importance, nearly all of China’s oil arrives through Southeast Asia from the Middle East via Malaysia’s Strait of Malacca. According to the U.S. Energy Information Administration, in 2015 nearly one-third of the world’s liquid petroleum products transported by sea moved through the Strait of Malacca, which is only about 1.7 miles wide.[8] Four-fifths of all China’s ship-transported oil arrives through those straits and then the South China Sea. [9] China, which cannot prevent other international actors from disrupting its sea lanes and which must rely instead of the United States to guarantee freedom of navigation,[10] tends to view its trade and oil security “through the prism of American-Japanese containment.”[11] It worries that a terrorist attack, natural disaster, or most likely a military crisis with the United States over Taiwan could close straits throughout Southeast Asia’s waters, cutting off China’s oil supply and trade routes and disrupting its economy.

Lastly, investments in the region are a burgeoning piece of China’s global investment portfolio under its BRI and 21st Century Maritime Silk Road. Chinese outward foreign investment in ASEAN countries amounted to $14.7 billion dollars in 2017. Chinese investment and construction projects have flowed into all Southeast Asian countries, made possible by those trade and energy links through the South China Sea. Key partners include Malaysia, Thailand, Vietnam, and Indonesia. [12] They form the beginning of an over-sea economic chain China intends to link to the Middle East and Europe. China is now the third largest global investor in ASEAN behind Japan and ASEAN countries themselves,[13] and analysts expect Chinese investment in Southeast Asia to continue to grow, even as US investment declines as a share of the total.[14]

China’s military capabilities have exploded in the South China Sea alongside its investments. In 2009, China released maps showing an ambiguous “Nine-Dash Line” encompassing most of the South China Sea.[15] Although the meaning and legal basis of the line are unclear, the line created an outcry among Brunei, the Philippines, Malaysia, Taiwan, and Vietnam, all of which contest some of China’s territorial claims in the sea. Indonesia does not claim any territory there, but the nine-dash line does overlap with its exclusive economic zone.[16] In the years after 2009, China began building artificial islands – 3,200 acres of new land by 2018 – on reefs and rocks throughout the area encompassed by the dashed line, some of them military installations with missile launchers, hangars and runways, ports, and barracks. It also beefed up its coast guard and naval capabilities.[17] China now challenges foreign traffic in the area, including American military boats on freedom of navigation exercises and American reconnaissance flights.[18] China insists foreign vessels get permission before entering the area, and Chinese craft have intercepted American air force planes and forced American navy ships off course.[19] Chinese coast guard vessels have even run local fishing boats out of contested territory.[20] The U.S. insists all these activities violate freedom of navigation principles that are instrumental to ensuring unobstructed trade worldwide. Those principles, perhaps not incidentally, also guarantee U.S. military access to the region.[21] A 2016 United Nations court ruling in favor of the Philippines against China under the 1982 Law of the Sea Convention did not stop China’s projects in the disputed areas. Instead, China doubled its efforts to build better diplomatic relations with the Philippines and other affected countries while it continued to build.[22] Although China assures the United States it will not interfere with “innocent passage” of trade vessels through its claimed territory, the militarized South China Sea is now effectively China’s.[23]

“In short, China is now capable of controlling the South China Sea in all scenarios short of war with the United States,” Admiral Philip S. Davidson told Congress in May 2018.[24]

But why does China want to control the South China Sea?

Island Building: The Highest Stage of Capitalism

Although geostrategic concerns do play some part in China’s development of the South China Sea, a more important aspect of China’s activities there is its attempt to stave off a domestic economic crisis. China needs adequate outlets for overcapacity in its industrial sector and for its over-accumulating capital. China, V.I. Lenin, would argue, has reached the highest stage of capitalism: imperialism.[25]

In his outline of the origins of imperialism, Lenin argues capitalism – and despite its moniker, China’s ruling Chinese Communist Party is at this point unabashedly capitalist – invariably leads to imperialism.

“Economically, the main thing in this process [of capitalism transforming into imperialism] is the substitution of capitalist monopolies for capitalist free competition. Free competition is the fundamental attribute of capitalism, and of the commodity production generally. Monopoly is the exact opposite of free competition; but we have seen the latter being transformed into monopoly before our very eyes, creating large-scale industry and eliminating small industry, finally leading to such a concertation of production and capital that monopoly has been and is the result: Cartels, syndicates, and trusts, and merging with them, the capital of a dozen or so banks manipulating thousands of millions.”[26]

Free competition, as the traditional capitalist means it, has never really existed in the PRC’s major industrial sectors. But what is the Chinese state, with its massive state-owned enterprises, if not a cartel, syndicate, or trust? And what is the Chinese financial sector, with its massive, state-owned banks manipulating thousands of millions, if not a financial capital monopoly?

China has massive excess savings and foreign reserves produced by its 1980s and 1990s manufacturing and export-driven economic boom. China’s state-owned enterprises are “sitting on piles of cash”, according to one recent study.[27] Since 2014, China has been the world’s top exporter of capital,[28] and in 2009, government-controlled state-owned enterprises made up $38.2 billion (67.6 percent) of China’s total outward direct investment.[29] Those trends have been driven by the rapid growth of the Chinese economy that concentrated capital in the large state-owned enterprises. That pattern led to several structural economic problems, most notably for our purposes, over-production and excess capital accumulation.[30]

The surplus capital sloshing around China made it necessary beginning in the 1990s for China to seek new avenues through which to direct its capacity and capital. At first, China embarked on massive in-country infrastructure projects and waves of urbanization.[31] Once internal growth slowed, those projects triggered over-capacity in China’s industrial sector, especially coal and steel, and so in 1999 China launched its “Going Global” policy of seeking external outlets for investment.[32] That search for external outlets has only intensified over the last decade as China has grown increasingly concerned its rent-seeking producers and excess capital might cause a destabilizing economic crisis. Its ill-defined Belt and Road Initiative is the now the primary, centrally directed mechanism to prevent an economic crisis and promote the internationalization of the economy.[33] BRI, then, is definitively imperialist, as Lenin defines it. “Under modern capitalism,” Lenin writes, “when monopolies prevail, the export of capital has become the typical feature.”[34]

Viewed through Lenin’s lens, it becomes clear what China is up to in the South China Sea. Southeast Asia is a key link in China’s BRI, specifically its 21st Century Maritime Silk Road, which aims to link China’s southern provinces to Southeast Asia via ports and railroads and then to the Middle East’s oil reserves and the Mediterranean Sea. BRI is the critical outlet for China’s outward investment. China plans to invest more than $1 trillion in the its Belt and Road routes, including high-speed trains, power plants, port expansion, highways, and other infrastructure investment as it seeks to resolve its chronic over-production issues and find an outlet for its excess capital.[35] Aside from infrastructure and investment, China also hopes to create special industrial zones throughout Southeast Asia and to enhance economic integration and interregional trade.[36] Like Lenin’s reviled banking conglomerates, one of the chief financing mechanisms behind the entire BRI project is the Asian Infrastructure Investment Bank founded by China, which contributed $29.78 billion starting capital and has effective veto-power in the AIIB.[37] BRI is Lenin’s imperialism in 21st-century action.

Easing excess capital accumulation has not been the only goal of these external investments, either. Chinese companies have worked to secure throughout Southeast Asia the raw materials and energy resources necessary to continue to grow.[38] Among these are the potential gas and oil resources that sit below the waves of the South China Sea, as well as the mineral resources of some ASEAN countries. This too aligns with Lenin’s thesis of imperialism. “These monopolies are most firmly established when all the sources of raw materials are controlled by the one group. And we have seen with what zeal the international capitalist combines exert every effort to make it impossible for their rivals to compete with them; for example by buying up mineral lands, oil fields, etc. … Finance capital is not only interested in the already known sources of raw materials; it is also interested in the potential sources of raw materials, because present-day technical development is extremely rapid, and because land which is useless today may be made fertile tomorrow if new methods are applied.”[39]

Furthermore, as China transforms from an industrial state to a creditor state, it’s military plays an important enforcement role. Like other creditor nations before it, China profits doubly off the loans it extends to its more-impoverished Southeast Asian neighbors.  As Lenin puts it, “The increase in exports is closely connected with the swindling tricks of finance capital, which is not concerned with bourgeois morality, but with skinning the ox twice—first it pockets the profits from the loan, then it pockets other profits from the same loan which the borrower uses to make purchases”—now from Chinese companies.[40] This has been the case throughout Southeast Asia and the South China Sea. Moreover, countries like the Philippines now find themselves in debt traps that risk turning Chinese infrastructure projects built with Chinese materials into Chinese colonial possessions under the guns of Chinese boats. Much like Great Britain or America before it, China’s coast guard and navy “plays here the part of bailiff in the case of necessity.”[41]

“Great Britain’s political power protects her from the indignation of her debtors,” Gerhart von Schulze-Gaevernitz wrote.[42] Today, so does China’s.

Considering all these factors, China’s aggressive build up in the South China Sea is a natural outgrowth of its imperial policy and follows in the footsteps of empires before it. It is nothing if not a timeworn imperialist tradition. If China cannot guarantee control of the shipping routes in Southeast Asia, it cannot guarantee its lucrative investments, energy resources, and trade networks there. With its economy and the well-being of its party monopolists so reliant on external investment, resource development, and international trade, what choice does China have but to expand its military presence and capabilities in the region? Control of the South China Sea is a must.

Morality aside, China’s attempts to control the South China Sea are nothing the world hasn’t seen before. They are plain, old imperialism. And as with prior empires, they derive primarily from economic pressure inside its borders.

A Hegemonic Sea Change?

China, which believes it is the rightful imperial heir to the Southeast Asian sphere of influence, insists that its imperialist projects around the South China Sea align with its principle of “peaceful coexistence.” But Lenin was correct when he said “there can be no other conceivable basis under capitalism for the division of spheres of influence, of interests, of colonies, etc., than a calculation of the strength of the participants in the division … and the strength of these participants in the division does not change to an equal degree, for under capitalism the development of … countries cannot be even.”[43] And so the South China Sea, now in disequilibrium because of China’s imperialist expansion, has been set up for a calamity.

In his book War and Change in World Politics, Robert Gilpin argues the world is traditionally organized by one of three structures: a single hegemonic power, a bipolar arrangement, or a multipower arrangement characterized by multiple powers in balance-of-power situations. Since the fall of the Soviet Union, the world has been organized by a single American hegemon that has been largely able to shape or influence the world according to its interests, including free trade, and to enforce those interests primarily through its overwhelming naval power. Since the 2008 financial crisis, however, the world has slipped into a bipolar arrangement with the explosion of the Chinese economy and the subsequent growth of its military and political power and prestige. A bipolar order, Gilpin says, is the most unstable and short-lived of world organizations and quickly slips into disequilibrium and, often, war.[44]

Two factors determine a country’s status in the world order: power and prestige. Power accounts for a nation’s economic, political, and military capacities to directly shape the world, while prestige accounts for the perceptions of other states regarding a nation’s willingness and capability to exercise its power.[45] China’s power and prestige have both been supercharged, especially in Asia, surprising much of the world.

The rise of a new power often startles the world and particularly the dominant power. Leon Trotsky explains that new powers do not – indeed cannot – follow the same developmental trajectory as the old. Instead, they borrow the technology and knowledge of those powers which have gone before to rise rapidly and shake the global order. As Trotsky says:

“Although compelled to follow after the advanced countries, a backward country does not take things in the same order. The privilege of historic backwardness – and such privilege exists – permits, or rather compels, the adoption of whatever is ready in advance of any specified date, skipping a whole series of intermediate stages.”[46]

China, in 1978, had the “privilege of historic backwardness.” Over the course of Deng Xiaoping’s Opening and Reform that began that year, however, China launched itself out of backwardness and into the ranks of the world’s advanced, or at least advancing, countries. It skipped the intermediate stages of development, borrowing instead economic, technical, and military ideas to go, in the span of 20 years, from Asian backwater to Asian power. Its power has grown by the year, especially in relative terms after the 2008 financial crisis devastated the global economy outside of China.[47] Gilpin argues that “as power of a state grows, it seeks to extend its territorial control, its political influence, and/or its domination of the international economy,” exactly what China has done in the South China sea since 2009.[48] China, in its growing self-confidence, claims new territory in the South China Sea by bringing to bear its political power because of its desire to control the economy in Southeast Asia. This, in turn, further enhances its political power and prestige in the region as the smaller countries come to grips with China’s goals and prestige – its willingness to do whatever necessary to achieve them. As Philippines President Rodrigo Duterte recently told Reuters about a conversation he had with Chinese Chairman Xi Jinping regarding competition for oil resources in the South China Sea, “We’re friends, we don’t want to quarrel with you, we want to maintain the presence of warm relationship, but if you force the issue, we’ll go to war.”[49] There is nothing the formerly bellicose Duterte can do about it.

China’s actions and attitude in the South China Sea illustrate Gilpin’s theory that “as relative power increases, a rising state attempts to change the rules governing the international system, the division of spheres of influence, and most important of all, the international distribution of territory. In response, the dominant power counters this challenge through changes in its policies that attempt to restore equilibrium in the system.”[50] Contemporary China ignores previously established rules governing freedom of navigation in the South China Sea, claims and builds new territory, and enlarges its sphere of influence in Southeast Asia. Those actions directly challenge the supremacy of the author and protector of the current order: The United States. The old status quo in the South China Sea favored the United States and its interests. Maintaining that status quo grows more difficult for the United States as, faced with diminishing returns, competing with China in Southeast Asia requires much greater financial costs to contest China’s ambitions with adequate power. It is not easy or cheap to control a sea on the other side of the world in the backyard of a rising power. “The principal external factor undermining the position of the dominant state is the increasing costs of dominance … Increases in the numbers and strengths of rival, challenging powers force the dominant state to expend more resources to maintain its superior military or political position,” Gilpin writes.[51] “There is a tendency for the economic costs of maintaining the international status quo to rise faster than the financial capacity of the dominant power to support its position and the status quo[52] … In these situations, the disequilibrium in the system becomes increasingly acute as the declining power tries to maintain its position and the rising power attempts to transform the system in ways that will advance its interests. As a consequence of this persisting disequilibrium, the international system is beset by tensions, uncertainties, and crises.”[53]

What is to be done, Mr. Gilpin?

The United States, Gilpin would argue, is now faced with two choices to resolve the global disequilibrium: appeasement or war.

For a declining power, Gilpin says the most attractive response to the rise of a challenger is to “eliminate the source of the problem. By launching a preventative war, the declining power destroys or weakens the rising challenger while the military advantage is still with the declining power … however, besides causing unnecessary loss of life, the greatest danger inherent in preventative war is that is sets in motion a course of events over which statesmen soon lose control.”[54] War cannot, or should not, any longer be an option for the United States. Power in the South China Sea has shifted too far in China’s favor. Against the military installations built up on islands through the sea as well as China’s swelling coastal naval capabilities, the United States stands to lose countless lives and waste uncountable sums in a full-scale war. While the United States’ military power undoubtedly still goes unrivaled in absolute brute force, the costs imposed by a status-quo maintaining war would be so high they would likely destroy the status quo anyway, leaving a void for a different power step into. Regardless, in the nuclear age, no one can afford to “lose control” of events. A hegemonic war between the United States and China in the South China Sea would certainly re-shape the status quo but not in a way either could predict or benefit from.

Gilpin offers a better, more difficult choice, one that would allow the United States to keep its power and most of its prestige and continue to maintain beneficial elements of the current world order—if Americans have the stomach to face the new reality in Southeast Asia. “The third means of bringing cost and resources into balance is, of course, to reduce foreign policy commitments. … The most direct method of retrenchment is unilateral abandonment of certain of a state’s economic, political, or military commitments … the third and most difficult method of retrenchment is to make concessions to the rising power and thereby seek to appease its ambitions.”[55] This the United States’ best course, though it is not an easy one to navigate.

It is time for the United States to give up on the South China Sea. It should shore up Taiwan, cede navigational control to China, and allow China to pursue its imperialist economic projects in Southeast Asia. As we have seen, China’s ambitions in Southeast Asia are primarily economic, not geostrategic. China seeks in the South China Sea to ensure its economic well-being and prevent an economic crisis that would harm China and the rest of the world. China’s designs, while not necessarily benevolent, nevertheless have largely positive impacts on the region, where it is simply replacing the United States as a dominant economic actor. As Gilpin predicts joining Lenin, “Although capitalist economies had an incentive to colonize the world, they also had an incentive to develop it.” That is what China is doing in Southeast Asia along its Maritime Silk Road. By retrenching at home, America can appease China’s ambitions, shore up America’s own economic situation, save lives and treasure, and begin finding its place in a new global equilibrium. It is not the easy choice, but it is the smart one.

Gilpin, however, might not be optimistic about the prospects:

“Throughout history the primary means of resolving the disequilibrium between the structure of international system and the redistribution of power has been war, more particularly, what we shall call a hegemonic war. … A hegemonic war is the ultimate test of change in the relative standings of the powers in the existing system. … The conclusion of one hegemonic war is the beginning of another cycle of growth, expansion, and eventual decline. The law of uneven growth continues to redistribute power, thus undermining the status quo established by the last hegemonic struggle. Disequilibrium replaces equilibrium and the world moves toward a new round of hegemonic conflict. It has always been thus and always will be, until men either destroy themselves or learn to develop an effective mechanism of peaceful change.” [56]

With a proper, Leninist view of China’s imperialist economic ambitions in the South China Sea and a better understanding based on Gilpin’s theory of global hegemonic transition, however, this time could be different.

[1] See for example, Phillip Chertoff’s “Behind China’s Ambitious Plan to Reshape World Power” (The Aspen Institute, May 7, 2018) or Michael Pillsbury’s The Hundred-Year Marathon: China’s Secret Strategy to Replace America as the Global Superpower (London: St. Martin’s Press, 2015).
[2] Pence, Mike, “Vice President Mike Pence’s Remarks on the Administration’s Policy toward China,” speech at the Hudson Institute (October 4, 2018).
[3] Allison, Graham, “The Thucydides Trap: Are the U.S. and China Headed for War?” (The Atlantic, September 24, 2015).
[4] Council on Foreign Relations, “Territorial Disputes in the South China Sea”, December 10, 2018, https://www.cfr.org/interactives/global-conflict-tracker#!/conflict/territorial-disputes-in-the-south-china-sea, accessed December 12, 2018.
[5] Xinhua, “China-ASEAN Trade Volume Hits Record High in 2017”, January 28, 2018.
[6] RAND Corporation, “At the Dawn of Belt and Road: China and the Developing World” (October 2018), 42.
[7] CNBC, “China Quietly Installed Defensive Missiles Systems on Strategic Spratly Islands in Hotly Contested South China Sea”, May 2, 2018.
[8] The U.S. Energy Information Administration, “The Strait of Malacca, a Key Oil Trade Chokepoint, Links the Indian and Pacific Oceans”, https://www.eia.gov/ (https://www.eia.gov/todayinenergy/detail.php?id=32452, accessed December 4, 2018)
[9] Steinberg, David I., and Fan Hongwei. Modern China-Myanmar Relations: Dilemmas of Mutual Dependence (Copenhagen: Nordic Institute of Asian Studies, 2012), 168-169.
[10] Hongyi Harry Lai, “China’s Oil Diplomacy: Is it a Global Security Threat?” (Third World Quarterly, Vol. 28, No. 3, 2007), 534
[11] Lee, Pak K., “China’s Quest for Oil Security: Oil (Wars) in the Pipeline?” (The Pacific Review, Vol. 18, No. 2, June 2005), 289.
[12] RAND Corporation, “At the Dawn of Belt and Road: China and the Developing World” (October 2018), 42.
[13] South China Morning Post, “South China Sea is Beijing’s Top Foreign Policy Priority with Developing Nations, US Think Tank Says”, October 17, 2018.
[14] Nikko Asset Management, “The Rise of Chinese FDI in ASEAN”, October 5, 2017.
[15] U.S. Office of the Secretary of Defense, “Annual Report to Congress: Military and Security Developments Involving the People’s Republic of China” (2018), 12-13.
[16] Ibid, 12-13.
[17] The New York Times, “China’s Sea Control is Done Deal, Short of ‘War with the U.S.’”, September 20, 2018
[18] Ibid.
[19] BBC, “South China Sea: Chinese Ships Force U.S. Destroyer Off Course”, October 2, 2018.
[20] Reuters, “Philippines Accuses China of Turning Water Cannon on Its Fishing Boats”, April 21, 2015.
[21] The New York Times, “China’s Sea Control is Done Deal, Short of ‘War with the U.S.”.
[22] [22] U.S. Office of the Secretary of Defense, “Annual Report to Congress: Military and Security Developments Involving the People’s Republic of China” (2018), 12-13.
[23] CATO Institute, “A Balanced Threat Assessment of China’s South Sea Policy,” August 28, 2017.
[24] The New York Times, “China’s Sea Control is Done Deal, Short of ‘War with the U.S.”
[25] V.I. Lenin, Imperialism: The Highest Stage of Capitalism (New York: International Publishers, 1939)
[26] Lenin, Imperialism, 88.
[27] Lehmann, Tavares, Teresa, Ana, and Lehmann, Fredrick. “Outward Direct Investment by Chinese State-Owned Enterprises” (Competitiveness Review, Vol. 27, Issue 3, 2017) 231-52.
[28] Götken, Kerem, “One Belt, One Road: Capital Export with Chinese Characteristics” in Economic Issues in Retrospect and Prospect (London: IJPOEC Publications, 2018), 15.
[29] U.S.-China Economic and Security Review Commission, “Going Out: An Overview of China’s Outward Direct Investment” (March 30, 2011), 6.
[30] Götken, “One Belt, One Road: Capital Export with Chinese Characteristics,” 15.
[31] Ibid, 15.
[32] Ibid, 5.
[33] Götken, Kerem, “One Belt, One Road: Capital Export with Chinese Characteristics”, 24.
[34] Lenin, Imperialism, 62.
[35]Götken, Kerem, “One Belt, One Road: Capital Export with Chinese Characteristics”, 19-20.
[36] Ibid, 19-20.
[37]Ibid, 19-20.
[38]Ibid, 17.
[39] Lenin, Imperialism, 82-83.
[40] Lenin, Imperialism, 116.
[41] Schulze-Gaevernitz, Gerhart von, Britischer Imperialisms (cited in Lenin, Imperialism, 101).
[42] Ibid, 101.
[43] Lenin, Imperialism, 119.
[44] Gilpin, Robert, War and Change in World Politics (Cambridge: Cambridge University Press, 1983), 29.
[45] Ibid, 31.
[46] Knei-Paz, Baruch, The Social and Political Thought of Leon Trotsky (Oxford: Clarendon Press, 1978), PAGE)
[47] Despite a drop in its GDP growth rate, China continued to grow at nearly 10 percent through 2009. The United States shrunk 2.78 percent and the world 1.74 percent, according to data from the World Bank.
[48] Gilpin, War and Change in World Politics, 106
[49] Reuters, “Duterte says China’s Xi Threatened War if Philippines Drills for Oil”, May 17, 2018.
[50] Gilpin, War and Change in World Politics, 187.
[51] Ibid, 168-169.
[52] Ibid, 156.
[53] Gilpin, War and Change in World Politics, 197.
[54] Gilpin, War and Change in World Politics, 191.
[55] Gilpin, War and Change in World Politics, 191-193.
[56] Gilpin, War and Change in World Politics, 197-198.

The Personal was Political: Mao’s Foreign Policy from 1950-1976

/ Jim Sojourner / Leave a comment

Above all else, Mao Zedong was a revolutionary.

From 1949 to 1976, Chairman Mao ruled his People’s Republic of China, directing its actions inside and out. During the last 27 years of his life, the Great Helmsman steered his country from crisis to crisis as he battled to piece together his China, keep it whole and safe, and win recognition for the socialist nation that he had forged in the fires of revolution. Mao’s foreign policy decisions were directed in part by hostile geostrategic circumstances. But as importantly, they were driven forward by Mao’s personal desire for continuous revolution inside China – to tear down the structures of old China and erect a new, revolutionary edifice with Mao, the greatest revolutionary, sitting atop. Mao’s need to keep the revolution burning influenced the foreign policy decisions he made during the Cold War, from the Korean War to the Taiwan Crisis and from the Vietnam War to the final rapprochement with the United States. But like any hot fire, Mao’s revolution warped the structure of China’s foreign policy and left China increasingly brittle as the fires cooled.

Mao learned early the efficacy of using foreign policy to manipulate domestic forces to serve his revolutionary projects. The eruption of the Korean War in the summer of 1950 threatened China’s geostrategic position, but it also presented an opportunity for the Chinese Communist Party leadership. Having declared the establishment of the PRC from Tiananmen less than a year earlier, Mao saw in the Korean conflict a chance to re-direct pressure from outside of China to consolidate the CCPs power within it. [i] By resolutely confronting U.S. imperialism in Asia, Mao sensed he could bolster the revolutionary fervor of China’s people to legitimize the CCP’s authority as the new ruler of China and propel forward his plans to remake the country.[ii] Although failing to defeat the Americans in Korea would create a dangerous geostrategic problem for China, the fight itself would mobilize the revolutionary potential of the weary Chinese masses, and victory would enhance the CCP’s standing in a country still not yet fully united.[iii] It was, Mao decided, worth the risk. After months of propaganda, once American forces crossed into North Korea, China surged to war in October 1950. Hundreds of thousands dead and wounded was a high price, but Mao got what he paid for. By fighting the Americans to a stalemate over the next three years, he secured CCP rule and his own status as the resolute leader of a revolutionary movement.[iv]

But Mao had far grander plans for China, and by 1958 he was yanking the nation into his Great Leap Forward, a mass campaign intended to thrust China out of the agricultural dark ages and into the revolutionary future by rapid industrialization and collectivization. The Chairman, increasingly worried that growing discord with the Soviet Union threatened to dampen his dreams of revolution, saw an opportunity in Guomindang-held Taiwan to once again to stoke China’s revolutionary sentiment and build support for the Great Leap.[v] When the United States and Britain intervened to break a left-wing coup in Iraq in July 1958, protests erupted in Beijing, Shanghai, and other major Chinese cities. Mao had his official pretext to shell Taiwan: solidarity against Western imperialism.[vi] During the episode, Mao himself best elucidated his Cold War foreign policy: “Besides it’s disadvantageous side, a tense [international] situation can mobilize the population, can particularly mobilize the backward people, can mobilize the people in the middle, and can therefore promote the Great Leap Forward in economic construction. … Tension … is to our advantage in that it will mobilize all [our] positive forces … To have an enemy in front of us, to have tension, is to our advantage.”[vii] The timing, too, gave partial lie to the official justification. On August 23, two months after the Western intervention in Iraq, the People’s Liberation Army opened fire on Jinmen and Mazu Islands, just off the mainland coast. The shelling went on into October, at which time the CCP leadership began looking for a way out, having gotten the enthusiastic domestic response Mao sought. In the end, the Chairman simply left both islands in Taiwan’s hands. He understood the usefulness of having a ready-made enemy to play up China’s “victim mentality” to encourage nationwide mobilization.[viii]

With the shelling of Taiwan, Mao had gotten such mobilization, and China leapt into a great abyss. But by 1960, however, it was clear that Mao’s Great Leap Forward was a catastrophe, leaving the countryside in ruins and tens of millions dead from starvation.[ix] More important to the Chairman himself, however, the Great Leap dimmed Mao’s aura of “eternal correctness”, and his eternal revolution was in danger of melting away.[x] Revolution was in retreat across the country, so by the time the economy began to recover in 1962, Mao was preparing to leap again. Mao had learned his lessons well in the 1950s; if he were to restart his revolution and save his reputation, he needed another crisis, and he had one in America’s war in Vietnam. By creating the impression that China faced a serious counterrevolutionary threat there, Mao could rekindle the dying revolution at home and re-secure his authority as the head of the CCP. Vietnam was tricky, though. If China’s involvement led to a direct Chinese-American military confrontation, the unwinnable war could sabotage his revolution at home.[xi] From 1965-1969, China sent engineering troops, antiaircraft artillery troops, and military equipment and materials to North Vietnam but not the full military support the Vietnamese expected.[xii] Frustrated by Mao’s balancing act and diverging political opinions regarding the Soviet Union, the carefully built relationship between China and North Vietnam frayed and then unraveled.[xiii]

It was just one of many deteriorating relationships in the background of Mao’s foreign policy.[xiv] After Stalin’s death in 1953, Mao saw a chance to take his place at the head of the international revolutionary movement. New Soviet leader Nikita Khrushchev gave his “secret speech” criticizing Stalin in 1956,[xv] and Mao decided he needed to root out China’s own Krushchevs—traitors who might criticize the Chairman’s revolutionary decisions—to begin a great purge and his final revolution.[xvi] In this atmosphere, from the late 1950s onward Mao engineered a series of incidents that alienated China from its erstwhile Soviet ally, using both the paranoia seeping from Sino-Soviet split as well as the “People’s War” in Vietnam to launch his Great Proletarian Cultural Revolution. In 1966, China, more and more alone as a result of Mao’s foreign policy, descended madness and chaos, while the flames of student-led revolution raged everywhere, scorching even China’s last remaining friends in Burma, Cuba, and elsewhere Mao badge-bearing students and CCP-funded insurgencies spilled out of China’s borders.[xvii]

The old revolutionary’s great revolution failed. It could not build anything new, only burn and destroy. By 1969, belligerence and disfunction threated to bring Soviet bombs down on China, now totally alone.[xviii] Mao had a choice: burn with the revolution or save himself – now the unquestioned and unassailable revolutionary – and what was left of the edifice or rubble he had made. He chose the latter, and for one last time, Mao’s personal political ambitions drove his foreign policy. With the Soviet Union entrenched as the top imperialist enemy, Mao saw a chance to pull back from the brink of war by reaching out to the Americans.[xix] After shooting broke out on disputed Zhenbao Island and hundreds of thousands of troops massed along the Sino-Soviet border, Mao signaled to the newly elected President Richard Nixon in 1970 that he would be welcome in Beijing. Henry Kissinger’s secret 1971 visit followed, and Nixon himself came to China in 1972 for leader-to-leader talks—and to listen to Mao philosophize in the Chairman’s personal study.[xx] It would take seven more years for full relations to be restored and for China to begin its true recovery. Mao died before that in 1976, China’s great revolutionary lying amid the ashes of his revolution.

[i] Chen Jian. Mao’s China and the Cold War (Chapel Hill: The University of North Carolina Press, 2001), Chapter 4, 85-117.
[ii] Ibid. Chapter 4, 85-117.
[iii] Waley-Cohen, Joanna. The Sextants of Beijing: Global Currents in Chinese History (New York: W.W. Norton & Company, 1999, digital edition), 288-290.
[iv] Ibid, 288-290.
[v] Westad, Odd Arne. Restless Empire: China and the World Since 1750 (New York: Basic Books, 2012), 337.
[vi] Chen Jian, Mao’s China and the Cold War, 175.
[vii] Chen Jian. Mao’s China and the Cold War, Chapter 7, 161-204.
[viii] Ibid. Chapter 7, 161-204.
[ix] Westad. Restless Empire, 336.
[x] Chen Jian. Mao’s China and the Cold War, 210.
[xi] Westad. Restless Empire, 348.
[xii] Chen Jian, Mao’s China and the Cold War. Chapter 8, 205-237.
[xiii] Westad. Restless Empire, 348.
[xiv] Ibid, 350-352.
[xv] Khan, Sulmaan. “The Cultural Revolution” (class lecture, The Foreign Relations of Modern China, The Fletcher School of Law and Diplomacy, Medford, Massachusetts, November 2018).
[xvi] Chen Jian. Mao’s China and the Cold War.
[xvii] Khan, “The Cultural Revolution”.
[xviii] Westad, Restless Empire, 360.
[xix]Chen Jian, Mao’s China and the Cold War, Chapter 9, 238-276.
[xx] Ibid, Chapter 9, 238-276.