As 2016 begins, an historic contest is underway,
largely hidden from public view, over competing Chinese and Western
strategies to promote economic growth. The outcome of this struggle will
determine the fate of much of Eurasia in the decades to come.
Skyscraper in Shanghai/Pixabay
STANFORD
– As 2016 begins, an historic contest is underway over competing
development models – that is, strategies to promote economic growth –
between China, on the one hand, and the US and other Western countries
on the other. Although this contest has been largely hidden from public
view, the outcome will determine the fate of much of Eurasia for decades
to come.
Most
Westerners are aware that growth has slowed substantially in China,
from over 10% per year in recent decades to below 7% today (and possibly
lower). The country’s leaders have not been sitting still in response,
seeking to accelerate the shift from an export-oriented, environmentally
damaging growth model based on heavy manufacturing to one based on
domestic consumption and services.
But
there is a large external dimension to China’s plans as well. In 2013,
President Xi Jinping announced a massive initiative called “One Belt,
One Road,” which would transform the economic core of Eurasia. The One
Belt component consists of rail links from western China through Central
Asia and thence to Europe, the Middle East, and South Asia. The
strangely named One Road component consists of ports and facilities to
increase seaborne traffic from East Asia and connect these countries to
the One Belt, giving them a way to move their goods overland, rather
than across two oceans, as they currently do.
The
China-led Asian Infrastructure Investment Bank (AIIB), which the US
earlier this year refused to join, is designed, in part, to finance One
Belt, One Road. But the project’s investment requirements will dwarf the
resources of the proposed new institution.
Indeed, One Belt, One Road represents a striking departure in Chinese policy. For the first time, China is seeking to export its development model
to other countries. Chinese companies, of course, have been hugely
active throughout Latin America and Sub-Saharan Africa in the past
decade, investing in commodities and extractive industries and the
infrastructure needed to move them to China. But One Belt, One Road is
different: its purpose is to develop industrial capacity and consumer
demand in countries outside of China. Rather than extracting raw
materials, China is seeking to shift its heavy industry to less
developed countries, making them richer and encouraging demand for
Chinese products.
China’s
development model is different from the one currently fashionable in
the West. It is based on massive state-led investments in infrastructure
– roads, ports, electricity, railways, and airports – that facilitate
industrial development. American economists abjure this
build-it-and-they-will-come path, owing to concerns about corruption and
self-dealing when the state is so heavily involved. In recent years, by
contrast, US and European development strategy has focused on large
investments in public health, women’s empowerment, support for global
civil society, and anti-corruption measures.
Laudable
as these Western goals are, no country has ever gotten rich by
investing in them alone. Public health is an important background
condition for sustained growth; but if a clinic lacks reliable
electricity and clean water, or there are no good roads leading to it,
it won’t do much good. China’s infrastructure-based strategy has worked
remarkably well in China itself, and was an important component of the
strategies pursued by other East Asian countries, from Japan to South
Korea to Singapore.
The
big question for the future of global politics is straightforward:
Whose model will prevail? If One Belt, One Road meets Chinese planners’
expectations, the whole of Eurasia, from Indonesia to Poland will be
transformed in the coming generation. China’s model will blossom outside
of China, raising incomes and thus demand for Chinese products to
replace stagnating markets in other parts of the world. Polluting
industries, too, will be offloaded to other parts of the world. Rather
than being at the periphery of the global economy, Central Asia will be
at its core. And China’s form of authoritarian government will gain
immense prestige, implying a large negative effect on democracy
worldwide.
But
there are important reasons to question whether One Belt, One Road will
succeed. Infrastructure-led growth has worked well in China up to now
because the Chinese government could control the political environment.
This will not be the case abroad, where instability, conflict, and
corruption will interfere with Chinese plans.
Indeed,
China has already found itself confronting angry stakeholders,
nationalistic legislators, and fickle friends in places like Ecuador and
Venezuela, where it already has massive investments. China has dealt
with restive Muslims in its own Xinjiang province largely through denial
and repression; similar tactics won’t work in Pakistan or Kazakhstan.
This
does not mean, however, that the US and other Western governments
should sit by complacently and wait for China to fail. The strategy of
massive infrastructure development may have reached a limit inside
China, and it may not work in foreign countries, but it is still
critical to global growth.
The
US used to build massive dams and road networks back in the 1950s and
1960s, until such projects fell out of fashion. Today, the US has
relatively little to offer developing countries in this regard.
President Barack Obama’s Power Africa initiative is a good one, but it
has been slow to get off the ground; efforts to build the Fort Liberté
port in Haiti have been a fiasco.
The
US should have become a founding member of the AIIB; it could yet join
and move China toward greater compliance with international
environmental, safety, and labor standards. At the same time, the US and
other Western countries need to ask themselves why infrastructure has
become so difficult to build, not just in developing countries but at
home as well. Unless we do, we risk ceding the future of Eurasia and
other important parts of the world to China and its development model.
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