Mark Jones

What is the nature of the current crisis? Where is it heading? What are the possible outcomes? The world geopolitical and economic system is holistic, and in many ways hyper-centralized and extremely fixed in how it behaves, but is composed of discrete elements with differing degrees of partial or relative autonomy. Different regions are subject to different dynamics. The rates of growth, or relative or absolute decline, differ between them. The system changes as a whole, but change also occurs in the existing equilibrium, and in balancing factors of regional economic and political power.

A.G. Frank, Immanuel Wallerstein and others have argued that the main trend in the world today is the decline of Anglo-Saxon hegemony and the re-ascent of Asia, and above all China. Legitimate questions arising include: Will this be a new American century, or is US hegemony as profoundly challenged as many now argue? Will China achieve regional hegemony, and is it capable of going on to true global hegemony? Or will China collapse when the sources of growth (easily identifiable and not the result of magic) fade, and underlying demographic, ecological, resource, and inter-ethnic strains start to tell, possibly destroying the unitary Chinese socioeconomic space, just as the USSR was destroyed by its failure in global competition?

A second group of questions: If there is a transition going on from the global hegemony of American to Chinese dominance, and a transition from the present Anglo-Saxon world system to a differently ordered world with Asia as its center of gravity and propulsive dynamism, how will this transition occur and become effective? Is a world war thinkable, or can a peaceful transition take place from the Anglo-Saxon-centered world to a Sino-centric world? Can such a transition happen at all? Might the two systems abort in an endgame resource war for declining oil reserves, through uncontrollable climate change, or other factors?

It should be borne in mind that the changeover from declining to ascending hegemony can happen - and has historically - not by means of war but with the consent and active participation of the declining power, which in some cases may even push forward the claims of the ascendant power, surrendering its own hegemonic status and freely giving up many strategic and economic possessions. There are examples of this from antiquity and in the Middle Ages, and the modern example is that of the surrender by Britain of its global-hegemonic status to an initially unwilling, isolationist US during the 1930s and 1940s. This process did to some degree contravene, or at any rate qualify, Lenin's thesis about inter-imperialist rivalry always leading to war, although arguably it was Lenin's own success in creating the USSR which caused this, by forcing the British to take a defeatist view of their own prospects. Is it thinkable that the US might surrender hegemony to China? Maybe it is more thinkable than we realize, once we canvass the alternatives, and once we look beyond the rabid posturings and imperialistic breast-beating of the US ruling class.

It is salutary to compare modern attitudes with those that were prevalent in Victorian Britain, during the period of unquestioned British global supremacy. Check out Rudyard Kipling or J.G. Farrell - the British were at least as sure of their manifest destiny, of their imperial, civilizing mission, and at least as arrogantly confident about an empire on which "the sun would never set," and about the racial superiority of their kind, as is the US today. Nevertheless, the time was not long before the British abandoned imperial pretensions, packed their colonial kit and left. Winston Churchill, in his desperate attempts to lever the US out of its isolationist neutrality in 1940, gave away many key strategic assets to Roosevelt, including not only the British and South African gold reserves, but the global network of island bases on which British imperial communications systems depended (this was the backbone of the information systems supporting the world markets of the time).

The middle decades of the last century might best be seen as an interregnum, during which time the declining and ascendant imperialist powers, Britain and the US, colluded and collaborated to fight rivals (Japan, Germany) and marginalize or contain rivals (Bolshevism). Once US hegemony was assured (by 1945) it was relatively straightforward to restructure the global system on a new, US-dominated basis, and to create the institutions and frameworks for global commerce and international law that secured unchallenged US hegemony. Except for two brief periods during the Korean and

Vietnam Wars, the USSR ceased to be a serious challenge after 1945, despite the much-vaunted menaces of the Cold War period.

The British surrendered their empire in pursuit of their own best interests, and indeed for national survival. But the psychological trauma and the bitter taint of defeat scarred a whole generation of people, not merely in the British ruling elites but among wider social classes with a sentimental interest in the empire. This included wide sections of the British working class. We can especially identify the so-called aristocracy of labor, which shared most of the racist assumptions behind the ideology of empire, and benefited materially from the so-called "social imperialism" of the military Keynesian/ welfare state reforms of the early postwar period, partly financed by, and riding on the back of, ebbing imperial wealth.

In its heyday the British Empire was more powerful and effective than the US Empire has been or is today. The British not only moved populations around in huge numbers; they also moved plant and animal species. The British did more to shift and transplant alien flora and fauna from one continent to another, thus reconstructing whole ecosystems, than any other empire, although the Romans did a lot more in that sphere than most people realize. It takes a lot of arrogance and certainty to do the kinds of things the British ever-so-freely took it upon themselves to do. They reshaped whole continents, from Australasia through Africa to Latin America. Successive waves of emigration from the homeland created a whole English-speaking world, of which the US was at first only a subset and which it finally inherited, but had not created. The British plowed their way through every precapitalist social formation they encountered, and either wiped it out or, through colonialism, totally reconstructed it. Yet despite (or because of) these grandiose achievements, the British Empire, which seemed so enduring, was a short-lived thing. There is nothing to suggest that the seeming permanence of the US imperium should be any less fleeting. There is also no reason to suppose that sheer self-interest might not drive Americans themselves into a recognition that the price of domination, alone and unchallenged, is too high, and that an accommodation must therefore eventually be made with a rival who might one day become a successor. Since the 1939-45 war, the US has in fact made a practice of co-opting present and potential rivals into junior partnership. It has done this not only to Britain, but also to Germany (1960s), Japan (1970s and 1980s) and latterly even to Russia (from 1991).

The US is now functionally locked in to Chinese industrial capitalism; the two states are in a tight embrace, performing a minuet which is part dance of death and part marriage of convenience.

Both states face many common problems, and each needs the other because of complementarities and useful asymmetries. However, the radical contradictions between them ensure that they are imperial rivals. And the balance of power between them appears to be changing. US economic and therefore military growth significantly declined from the later 1980s through to 2002. China has been growing faster, and has now entered a decisive phase of industrialization, where its industry is so diverse, deep, broadly based, and synergistic that it appears to be crossing a threshold, and is emerging as the world's premier industrial power, eclipsing all others, with an R&D capability equivalent to that of the US or Japan. Many estimates indicate that Chinese industrial production will outstrip that of the US during the present decade. It seems clear that Asia as a whole is now poised on the cusp of precipitous changes, and that the US is now clearly the declining regional power, giving way to rising regional hegemony for China. It is surely arguable, or even likely, that China could become the dominant power in Asia without the need for war, and with the US being unable to prevent this. Once the economic facts are in place, can the geopolitical consequences be far behind? What can prevent the binding together and fusion of Chinese, Japanese, and Taiwanese industry and capital, under Chinese hegemonic control?

Thus, for the first time in its history, the US now faces the distinct possibility of the partial eclipse of its global power. I cannot predict what will happen, and I doubt whether anybody can know, but it is surely plausible that the US will be obliged to accept its strategic defeat with good grace, to accept a seismic change in its status and position, because the US is simply no longer powerful enough to resist. The rise of China to at least regional Asian ascendancy seems to be already in the script, an inevitable and unalterable outcome of present trends.

Lots of caveats and objections, surely, can be entered here. For one thing, it may really be true that US technological and military supremacy is now so great that it will be impossible for China ever to "effectuate" its latent regional supremacy, and take advantage of its potential power during some future world crisis. One cause, but also consequence of this would be the world economy entering a very protracted period of stagnation and decline. Also, China may be plagued by crises of national origin on one of a number of fronts: demography, environment, resource depletion, and so on.

A crucial indicator will be which state or region comes out of a depression first, and A.G. Frank rightly dwells on this. Under present circumstances, it seems unlikely that global bourses will recover very quickly, and the present bear market might be very prolonged. In fact, any protracted bourse crisis on Wall Street, with the index hitting even 4,000 points, will trigger panic equivalent to the 1929 crash, the post-1929 collapse of the fantasy paper economy initiating a six-year, worldwide depression in the real economy. Optimists argue that, even in the event of a paper-economy meltdown, this will not harm the real economy because mistakes made in the 1930s will not be repeated. That is, protectionism, futile and counterproductive attempts to balance budgets, monetarist rivalries, the deflationary gold standard, and so on. Wrong. They will be, and in any case even if enlightened Keynesian policies are in place, it may not help. Keynesian deficit spending to bolster the domestic economy has not helped Japan in the past decade of increasingly futile attempts to spend the country out of deflationary recession.

The same people who say that policy and regulatory improvements mean that another 1929-style crash cannot happen also often said there would never be another bear market, and that the New Economy was a "paradigm change." None other than Federal Reserve chairman Alan Greenspan himself became an eager convert to the neoliberal view that soaring stock market index numbers were not, as he first thought, the result of "irrational exuberance" but represented a fundamental change in the economy and, in particular, a quantum shift in the rate of productivity growth. But we shall show that a slump can happen whatever kind of Keynesian demand management is attempted. Deficit spending does not overcome modern deflationary crises. So, as Wynne Godley argued in the London Financial Times in late 2002, a real and perhaps catastrophic slump, a real meltdown of the US economy in particular, is now a distinct possibility, even a probability. In that case, we might get a near-decade of mass unemployment in the capitalist heartlands, and a deepening pauperization of the peripheries. Yet this will take place on a geopolitical scene in which the essence of the epoch is long-term competition for supremacy between China and the US.

As Henry Liu argues, China abandoned its decades-long attempt at autarkic development during the Mao Zedong years. Instead, it has elected to join the world market and build a modern industrial system on the basis of export-led growth, rather than through self-sufficiency and import substitution. This is a highly dangerous strategy for both China and the world, although probably inevitable - China's leadership had no choice but to break out of the Maoist policy dead-end. It is dangerous for China because it entails an unsustainable commitment to growth through exports. Classical trade policy explains why overdependence on exports and capital inflows from abroad leads to further impoverishment of the masses, social tensions, and the inability to renew and develop essential social and economic infrastructures. At the same time, aggressive exporting helps destabilize the world economy. The counterpart to huge Chinese balance-of-payments surpluses are the increasingly unsustainable US trade and finance deficits. Additionally, aggressive exporting is inevitably deflationary. In effect, it pits the Chinese working class against the working classes of rival states. The question then becomes: Which of the rival, classic capitalist states is best able to raise its domestic exploitation rate? The winner will bankrupt its competitors. If successful, the strategy stands a good chance of destroying the bases of US world hegemony by destroying the US economy through endless deflationary down-spirals, starting with a savage cutback in overblown equity values. Chinese economic development policy is therefore - effectively, if not consciously - a policy of imperial rivalry and confrontation targeting the US.

The region which emerges first from a major and prolonged slump resulting from deflationary competition (and a slump is now surely on balance more likely than not) will be well placed to move out of mere regional dominance, and take its chances at becoming the unrivaled world superpower. If China survives the shocks and strains caused by a global slump in demand, then it is certainly well placed to emerge first from the subsequent trough. It is this line of thinking which leads me to argue that we probably are, as Frank says, in the throes of transition between hegemonies, and that indeed the present world economic crisis may itself be symptomatic of this crisis of transition, just as global collapse in the 1920s was symptomatic of the final decay of British power. China is more competitive, and this is the bottom line. Conventional or classic recovery for the capitalist world economy is likely to occur, at least through 2010-15, from any economic setback. The power with the underlying competitive edge will come out first. It will then be positioned to begin the process of institutional, legal and commercial restructuring to entrench its hegemony and ensure its dominance.

There is, however, one huge caveat to this whole line of argument. It does not take account of underlying, apolitical, extra-human, and planetary limits, which will most certainly afflict the world system, and which mean we are entering a still more radical and decisive epoch of historical challenge, upheaval and transformation in everything from geopolitics to everyday life. As is indicated by the very title of this book, no geopolitical analysis can ignore the colossal threats posed by the storm of self-reinforcing crises - anthropogenic climate change, mass extinction of species, and destruction of the biosphere - all of which were enabled by fossil energy supplies, whose wipeout will be rapid. These factors form a vast backdrop to all world-system or economics-based considerations of inter-imperial rivalry a la Lenin. But before attempting to integrate this domain of issues into the discussion, let us consider again this central question: What if China emerges first from the probable imminent global economic slump?

This slump, if it occurs, will hit the US and Europe especially hard. The dollar will decline, industrial output will shrink, consumption levels and living standards will drop with incomes. The US economy will be first and hardest hit, notably because it is wildly unbalanced, extremely dependent on cheap energy, and equally dependent on the dollar's "reserve currency" hegemony, which enables its payments deficit to be ignored. Any US economic slump will inevitably bring with it a collapse in personal and public consumption levels. Obviously this collapse in US demand will hit major exporters, China above all. China will then have to find other outlets for its huge industrial output. This means exporting to other regions which may be doing little better than the US, such as Europe and Japan, India, Southeast Asia, Russia, and the Latin American countries - but perhaps firstly, countries which export oil, minerals, metals, and agrocommodities, which profit from higher prices for these items.

The major weakening of the dollar (if it happens) may take the US out of the current game for a very long time. We will then have a situation in which the US, too, must export its way out of trouble. Now we shall really see just how competitive the New Economy is, and how much US productivity really increased in the "dot-com" years. Under any hypothesis, however, no sane person would bet that the US can beat China at its own game. Walk around your house and mentally eliminate everything made in China, and see what's left. Now try finding anything with "Made in the USA" on it.

Once you strip out dollar hegemony and the advantages of being the global reserve currency (or "currency of last resort"), you are left with a very naked emperor. Except for weaponry, control of the skies and sea lanes, control and surveillance of world information networks, and a powerful propaganda machine, the US has few cards left. Take away dollar hegemony and you have just another regional economy with its fair share of internal problems (soil exhaustion, aquifer depletion, near-exhaustion of domestic oil and gas reserves, lack of alternative energy supplies, a polluted environment, poor infrastructures, badly designed and expensive-to-maintain urban environments). If the US has to compete on a level playing field with the rest of the world, then it may find that its urban infrastructure is just as uneconomic and unsustainable as was the Soviet Union's loss-making effort to base itself on the industrialization of the Urals and Siberia. The US currently uses twice as much energy and raw materials per capita as the EU15 average, and more than ten times that of China. It is desperately uncompetitive. When the dollar has to be backed up by real values, US per capita GNP may fall by half in just a few years, as in the Great Depression. Under these conditions it is hard to see how the US can hope to maintain its global reach and present hegemonic position.

Since China faces similar global resource, energy and environmental challenges, and since the collapse of the world market must increase internal social instability, the Chinese regime will not wait around for the US to put the world to rights. It must produce - and export - or die, as outgoing President Zhou explained was the only choice for China during the 1997 Asian monetary crisis.

The two states who first came out of the Great Depression were Germany and the USSR - and each broke free through massive military spending. More recently, the Reagan "economic miracle" of the 1980s was largely driven by vast military spending, financed by government borrowing. Undoubtedly this is the first option large, militarized states consider when their leaders grope for reflation, lowered unemployment, and re-emergence, with yet more power, on the world scene. A program of "military Keynesianism" is certainly an option for China, which is just beginning to expand and modernize its military massively. American defense spending is by comparison much less sustainable at present, let alone projected levels, because of skyrocketing trade and finance deficits, which will be intensified by a weakening dollar. Moreover, the extremely capital-intensive nature of US weapons programs means that defense spending does little to galvanize the wider economy. This is not yet true of China. Therefore, in a major world depression China could probably increase its national military spending dramatically, knowing that this will boost its economy while reinforcing its drive towards hegemony. The Chinese navy already carries out much gunboat diplomacy in the coastal states of Asia. The Chinese will surely seek to emerge from a depression through military and economic domination of the entire Asian region, by saturating markets and hegemonizing its skies, seas, and data networks.

Sino-American joint or shared global hegemony may be the strategic compromise both states will entertain, for want of an alternative. Neither really wants war, but the resource and energy imperative may force the hand of either party - more likely that of the US. Under any hypothesis, however, the US will have declining hegemonic power, and China's will increase.

The last ten years have seen the greatest unforced capitulation in history - the uncontrolled implosion, or unconditional surrender, of the USSR, exploited by the biggest pyramid scheme in history (as Wynne Godley argues), all helping to create the biggest stock market bubble in history. The present bear market is not just a correction to that unprecedented human folly, unless you call Alaric the Hun's visit to ancient Rome a simple tourist's jaunt. This is surely the beginning of the end, not just of equity-culture, but of global Anglo-Saxon suzerainty. A.G. Frank was right: the pendulum is swinging back to Asia, but it is doing so under the final blowout of the model of petro-capitalism.

If, on the other hand, we are set on a course of global war, which was the outcome for "classic" economic depressions before 1914, and again through 1929-36, then Americans have only a very small window of opportunity (like Hitler enjoyed in 1939) before their military advantage evaporates. This is perhaps the real cause of Bush's headlong rush to war. It is China they must pre-empt. The Islamic world, broken-backed as it was and remains, is not the problem. This will be a war for the survival not only of the American Century but of that cultural zone where people actually live - the "burbs" with an SUV in every drive - the pinnacle of ostentatious consumption, born and raised on cheap oil.

Even in his lifetime, Lenin recognized that his original assumptions about the necessity of inter-imperial warfare and the certainty of subsequent proletarian revolutions would have to be qualified in light of new realities. When the science-fiction writer H.G. Wells visited Lenin in his Kremlin office, Wells told Lenin that although he did not know what weapons the next war would be fought with, he was quite sure that the one after it would be fought with bows and arrows. Lenin did not disagree: it was already apparent, before the advent of nuclear weapons, that modern warfare imposed intolerable costs on civilization. It was this realization above all which prompted Lenin's notions of peaceful coexistence: What use would the proletarian revolution be, if it inherited a wasteland? The effects of civil war and war of intervention on the young Soviet Russia from 1919 to 1921 was almost as catastrophic as nuclear war. And the USSR never recovered from World War II, as Mark Harrison has shown in his admirable studies of Soviet economic development. The propensity of the bourgeois to overconsume and destroy the earth, rather than let the workers inherit it, presents a conundrum which neither Lenin nor any other revolutionary has successfully addressed. But in the twentieth century the bourgeoisie also learned a terrible lesson. While we should not assume that war between the US and China is inevitable, we can be sure that the dynamic of history shows that the decline of US hegemony is inevitable, and that China will be the beneficiary.

It is clear to both these powers, and any interested observer, that the keystone of US global power is Middle Eastern oil. This was true throughout the last century and is even truer today, as the US confronts a proven domestic oil reserve base of around 30 giga-barrels (Gb), and consumes 6.5 Gb per year. The US energy crisis is both structural and accelerating. In the short to medium term these energy supply difficulties might be met partly by conservation measures, because the phenomenal wastefulness of US society leaves much scope for saving. But this is not necessarily compatible with robust economic growth despite the baying of Amory Lovins on the virtues of the unproven hydrogen economy. Above all, the US cannot afford to lose the economic race with China that at present it is losing. As I have already said, China's gross industrial output will probably exceed that of either the US, Japan, or Europe this decade. This will leave military control of Arabian oil as the remaining strategic asset - together with some military, intelligence and electronic technologies - to shore up the US global position. The US's pre-emptive move on Iraq will be largely designed to pre-empt China from asserting its power in the Middle East and becoming economically and strategically dominant there too. Can this US strategy succeed?

Looking ahead to the next 20 years, can Chinese hegemony consolidate itself? This would bring us back what may be termed, a la Chinoise, the Five Great Evils: anthropogenic climate change, mass extinction of species, destruction of the biosphere, resource depletion, and exhaustion of cheap energy supplies. But the Five Great Evils have no meaning by themselves. Rather, it is how people change in response to them that matters, and this is determined in the form and intensity of class struggle. At the moment conventional class struggle has almost no remaining political form, as mass societies around the world converge in a race to outwit, outpace, or simply ignore, for a little longer, the gathering storm.

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