China cannot follow America’s route to world leadership; US assumed world leadership because of unique historical circumstances

May 23, 2014 6:33 pm

China cannot follow America’s route to world leadership

By Adam Tooze

US assumed world leadership because of unique historical circumstances, says Adam Tooze

The US is, by some measures, about to cede to China its place as the largest economy. Some say that an era of Chinese world leadership cannot be far behind. But cast an eye over the history of America’s own rise, and one thing is clear: power did not come from economic might alone.

America’s trajectory was unprecedented. It took the first world war – an earth-shattering convulsion in global politics – not just to hoist the US into the role of global leader but even to create that role.

In this centenary year everyone is talking about the Great War. But what is it that we are talking about? It is mainly the hoary questions of war guilt and the diplomatic crisis of July 1914 that have exercised the historians. Amid arguments over whether Germany’s Kaiser Wilhelm was guilty or whether Europeans were sleepwalkers stumbling into war, the question that is too easily lost is: why should we care? Why should a dynastic clash, triggered by an assassination in the Balkans 100 years ago, matter in today’s interconnected world?

The conflict that began in 1914 was not a world war but a parochial struggle between the ancient dynasties of central and eastern Europe. It matters all the same – not so much for its causes as its effects.

Across Eurasia, the war wreaked change. In two years from 1917 the countries of eastern Europe were carved out of the territory of the defeated tsarist empire. Modern Ukraine first gained international recognition not from the Allies at Versailles but from imperial Germany and Habsburg Austria-Hungary at the peace conference of Brest-Litovsk in January 1918.

Russian resentment of Ukrainian independence dates not from the second world war but from the first. It was the resurgence of Russian power after 1920 and the defeat of a joint Ukrainian-Polish invasion that welded Kiev into the Soviet Union. It was then, too, that the struggle between Japan and the modern Chinese republic first came to the world’s attention. The Treaty of Versailles that ended the war with Germany was criticised from all sides but only China refused to sign it. Huge nationalist protests made it impossible for Beijing to accept the allocation to Japan of Germany’s imperialist rights to Chinese sovereign territory in the Shandong peninsula.

At the heart of this rearrangement of world affairs stood one fact: the rise of the US as the first superpower. Victorian Britain had commanded far-reaching influence. London was the acknowledged leader of the coalition against Germany. But it owed this to its empire; the UK itself was a modest-sized power. When the US supplanted it, it did so as a nation state.

US influence was undoubtedly anchored on its affluence. It became the world’s largest economy in the early 1870s. But economic capacity alone is not a source of power; it must be harnessed. And in the late 19th century, America lacked even the most basic institutions of a national economy. It was a peripheral member of the world economy, with prohibitively high tariffs and doubtful commitment to the international gold standard. The Federal Reserve board did not come into existence until 1913. It was the suicide of European power – the vast financial cost of the first world war, and the crisis of political legitimacy that followed the horrendous bloodbath – that opened the door to the assertion of American leadership.

It took a convulsion in global politics to create a chance for the US to assert its industrial and financial strength

Therein lies the difference between China’s ascent and America’s before it. The US rose against the backdrop of a total war that exhausted Europe’s military power and created the perfect canvas for America to assert its industrial and financial strength. Two-thirds of the shells fired on the Somme in 1916 were made and paid for by the US and Canada. The US made its claim to democratic leadership when the war had called into question all traditional standards of legitimacy. How else to account for the fact that President Woodrow Wilson, a conservative southerner and fervent advocate of Jim Crow laws, came to be regarded as the great saviour of global progressivism?

No such opportunity presents itself to China. Its relative financial and economic power is far less than America’s was in the early 20th century. Principal regional powers are not desperate to form alliances with it. Is Beijing about to proclaim a new crusade for modernity with Chinese characteristics? Surely not.

In any case, the search for this kind of simple historical analogy misstates the cognitive challenge of our own era. When we ominously announce that history is “restarting” and that “geopolitics is back”, let us not confuse those undeniable truths with the proposition that “history is repeating itself”.

There is no doubt that China’s resurgence will be the defining story at least of the early 21st century. Still, America’s path to power suggests that there is a complicated relationship between economic, political and strategic heft. Furthermore, the unique circumstances of America’s ascent – two world wars that convulsed Eurasia – are hardly likely to be repeated in the present era.

A thread of economic history may run from Britain in the 19th century to the US in the 20th and China in the 21st, but the twine of geopolitics is made of rougher hemp. A century ago, the first world war created for Washington a new position at the summit of world power, a position reinforced by US leadership in the second world war and the cold war.

The tangle of contemporary international relations is not nearly so diabolical. To imagine China’s ascent as fitting into this same historical pattern is a recipe not for comprehension but for unnecessary antagonism and conflict.

The writer teaches history at Yale and is the author of ‘The Deluge: The Great War and the Remaking of Global Order’

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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