[On the one hand, U.S. policy aims to constrain China’s economic
and military development because it is our chief competitor and thus
enemy. On the other hand, it seeks to secure the benefits of U.S.
companies’ trade with and investments in China.]
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US LEADERS SPLIT ON CHINA POLICY  
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Richard Wolff
August 4, 2023
CounterPunch
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_ On the one hand, U.S. policy aims to constrain China’s economic
and military development because it is our chief competitor and thus
enemy. On the other hand, it seeks to secure the benefits of U.S.
companies’ trade with and investments in China. _

, Photograph Source: The White House – Public Domain

 

On the one hand, U.S. policy aims to constrain China’s economic,
political, and military development because it has now become the
United States’ chief economic competitor and thus enemy. On the
other hand, U.S. policy seeks to secure the many benefits to the
United States of its companies’ trade with and investments in China
[[link removed]].
U.S. debates over “decoupling” the two countries’ economies
versus the milder version of the same
thing—“de-risking”—exemplify, on both sides, U.S. policy’s
split approach to China.

The difficult reality for the United States is economic dependence on
the world’s number two economy that deepens with China’s
relentless march toward becoming the world’s number one. Likewise,
China’s stunningly rapid growth over recent decades entangled it in
a complex economic codependence with the U.S. market, the U.S. dollar,
and U.S. interest rates. In stark contrast, neither the Soviet Union
nor Russia ever offered the U.S. economic opportunities or competitive
challenges comparable to what China now does. In this context,
consider World Bank 2022 data
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GDPs in Russia, Germany, China, and the United States: $1.5 trillion,
$3.9 trillion, $14.7 trillion, and $20.9 trillion, respectively.

The political right wings of both major U.S. political parties and the
military-industrial complex have long prevailed in shaping how U.S.
mainstream media treat the country’s foreign policies. Over the last
decade especially, the media has increasingly accused China of
aggressively expanding its global influence, of authoritarianism at
home, and of policies targeting the United States. Over recent
decades, big business interests promote a quite different U.S. foreign
policy prioritizing profitable coexistence between the United States
and China. U.S. policy splits and oscillates between these two poles.
One day Jamie Dimon of JPMorgan Chase bank and U.S. Treasury Secretary
Janet Yellen go to Beijing to support mutuality of interests while at
the same time, President Biden labels Xi Jinping a “dictator.”

The history and legacy of the Cold War accustomed U.S. media,
politicians, and academics to traffic in hyperbolic denunciations of
communism plus parties and governments they link to it. Right-wing
political forces have always been eager to update anti-Soviet, Cold
War logics and slogans for use against China’s government and
Communist Party as continuing villains. Old (Taiwan and Hong Kong) and
new issues (Uyghurs) mark an ongoing campaign.

Yet as the Cold War wound down and then collapsed with the USSR’s
demise, Nixon and Kissinger reconnected with a China already launched
on an economic development surge that never stopped. Capitalists from
the system’s old centers in the G7 (Western Europe, North America,
and Japan) poured investments into China to profit from its relatively
much lower wages and its rapidly growing internal market. Over the
last 50 years, consumer goods and capital goods flowed out of
factories in China to markets around the world. China became deeply
entangled in global supply chains. Exports from China brought an
inflow of payments in U.S. dollars. China lent many of those dollars
back to the U.S. Treasury to fund its growing budget deficits. China
joined Japan as the two major creditor countries of the United States,
the world’s greatest debtor country.

China’s investment of its accumulating dollars in U.S. Treasury
bonds helped to enable the fast-rising U.S. national debt over the
last half-century. That helped keep U.S. interest rates low to fuel
U.S. economic growth and its recoveries from several economic crashes.
China’s relatively low-priced exports reflected its low wages and
active government development supports. Those exports to the United
States helped prevent inflation over most of those years. In turn, low
prices reduced pressures from employees for higher wages and thereby
supported U.S. capitalists’ profits. In these and still other ways,
U.S.-China connections became deeply embedded in the functioning and
success of U.S. capitalism. Cutting those connections would risk very
adverse economic consequences for the United States.

Moreover, many proposals favoring such cutting are ineffective and
ill-informed fantasies. If the U.S. government could force United
States and other multinational corporations to close up shop in China,
they would most likely move to other low-wage Asian locations. They
would not return to the United States because its wages and other
expenses are too high and thus non-competitive. Where they do go will
entail sourcing inputs from China, already their most competitive
producer. In short, forcing capitalists to leave China will help the
United States minimally and hurt the Chinese minimally as well.
Closing off the China market for U.S. microchip-makers is likewise a
faulty fantasy. Without access to the booming Chinese market,
U.S.-based companies will be uncompetitive with other chip-makers
based in countries _not_ closed out of the Chinese market.

U.S. capitalism needs the inflow of most Chinese exports and needs
inclusion in China’s markets. U.S. megabanks need access to
China’s fast-growing markets or else European, Japanese, and Chinese
banks will eventually outcompete the U.S. banks. Even if the United
States could force or maneuver G7 banks to join a U.S.-led exit from
China, China’s banks and those of its allies in India, Russia,
Brazil, and South Africa (the BRICS) would control access to the
profitable financing of China’s growth. In terms of aggregate GDPs,
the BRICS are already a bigger economic system, taken together, than
the G7 taken together, and the gap between them keeps widening.

Were the United States to pursue its resumed Cold War crusade against
China—economically, politically, and/or militarily without nuclear
warfare—the results could risk major dislocations, losses, and
costly adjustments for U.S. capitalism. With nuclear warfare, of
course, the risks are still larger. Other than extreme parts of the
U.S. right wing, no one wants to take such risks. The United States’
G7 allies surely do not. Already they are imagining their desired
futures in a bipolar world split between falling and rising hegemons
and perhaps counterhegemonic groupings of other nations. Most of the
world recognizes China’s relentless growth and expansion as the
major dynamic of today’s world economy. Most likewise see the United
States as the major antagonist tilting against China’s rise into a
global superpower position.

What many observers of the China-U.S. clash miss are those of its
causes and shapers located in the extreme tensions and contradictions
besetting the employer-employee class conflicts within both
superpowers. Those class conflicts in the United States respond to
this basic question: whose wealth, income, and social position will
have to bear the major burden of accommodating the costs of declining
hegemony? Will the redistribution of wealth upward across the last
3-40 years persist, be stopped, or be reversed? Are rising labor
militancy across the United States and the quasi-fascistic resurging
U.S. right wing foretastes of struggles to come?

China’s remarkable ascension rapidly transformed a rural, poor,
agricultural economy into an urban, middle-income, and industrial
economy. The parallel transformation in Western Europe took centuries
and occasioned profound, bitter, and violent class struggles. In
China, the transformation took a few decades and was likely the more
profoundly traumatic for that reason. Will similar class struggles
erupt there? Are they building beneath the surface of Chinese society
already? Might the Global South be where global capitalism—the
system defined by its employer-versus-employee productive core—goes
finally to play the endgame of its profit-maximization fetish?

Both the United States and China display economic systems organized
around workplace organizations where a small number of employers
dominate a large number of hired employees. In the United States,
those workplace organizations are mostly private enterprises. China
displays a hybrid system whose enterprises are both private and
state-owned and operated, but where both types of workplace
organizations share the employer-versus-employee organization. That
organization typically features the employer class accumulating far
more wealth than the employee class. Moreover, that wealthy class of
employers can and usually does buy dominant political power as well.
The resulting mix of economic and political inequality provokes
tensions, conflicts, and social change.

That reality is already well established in both the United States and
China. Thus, for example, the United States has not raised its federal
minimum wage of $7.25 per hour since 2009. Both major political
parties are responsible. Yellen gives speeches bemoaning the deepening
inequalities in the United States, but the deepening persists. In the
tradition of blaming the victim, American capitalism tends to fault
the poor for their poverty. Xi Jinping also worries openly about
deepening inequalities: likely more urgent in nations calling
themselves socialist. Even though China has taken significant steps to
reduce its recently extreme economic inequalities, they remain a
serious social problem there too. The U.S.-China clash depends as much
on each nation’s internal class conflicts and struggles as it
depends on their policies toward one another.

China adjusts to the twists and turns in the United States’ split
policy approach. It prepares for both eventualities: cutthroat
competition abetted by intense economic nationalism possibly including
military warfare or a conjointly planned peaceful economic
coexistence. As China awaits the United States’ decisions on which
way to guide the United States’ economic future, China’s growth
will likely continue, matching and then surpassing the United
States’ global economic footprint. China’s stunning economic
growth success across the last 30 years secures China’s remarkable
hybrid economy of private and state enterprises supervised by and
subordinated to a powerful political party. An anxious world awaits
the next chapter in capitalism’s always dangerously uneven mix of
class and national struggles.

_This article was produced by __Economy for All_
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of the Independent Media Institute._

_RICHARD WOLFF is the author of Capitalism Hits the Fan
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Crisis Deepens
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He is founder of Democracy at Work
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* China
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* Cold War
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* Inequality
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