Interesting Times at the Committee for the Republic

Ambassador Chas W. Freeman, Jr. (USFS, Ret.)
10 September 2013 Washington, DC

I’ve written a book called: “Interesting Times: China, America, and the Shifting Balance of Prestige.” “Prestige” is the aura of power, the aspect of it that makes others want to be seen in your company. The balance of military power has not shifted, but the balance of prestige between the United States and China has. That makes a real difference, but how much of one?

I’m not going to rehash my book, but I will speak briefly tonight about three things: (1) how far China has come and where it’s headed; (2) whether China is able or willing to displace the United States as the global hegemon; and (3) the notion of our shifting our strategic attention more toward East Asia, which, of course, presupposes that we somehow restrain our seemingly irresistible impulse to start new wars in the Middle East.

First, a few words about Chinese progress. China has had a couple of bad centuries, but it’s back, and it’s on track soon to regain its millennial status as the largest economy in the world. Chinese think that’s the natural state of affairs. It is only the speed with which it has happened that they find remarkable. And it is.

When I first visited Beijing in 1972, GDP per capita there – in today’s dollars – was about $130. Last year, it was almost $14,000, with purchasing power equivalent to about $21,000. That’s a more than 100-fold increase in the wealth of the average Beijinger!

In 1972, Taiwan’s 16 million people had a GDP slightly larger than the China mainland’s 875 million. The Chinese economy is now expected to surpass ours in purchasing power terms by 2016, when we hold our next presidential election. China will almost certainly overtake us in nominal exchange rate terms before the 2021 centennial of the founding of the Chinese Communist Party. Not long ago, the Economist magazine predicted this will happen in 2018, but falling growth rates both here and in China may have altered that calculation.

In 1972, China’s worldwide imports and exports came to a grand total of $6.3 billion, including US-China trade of about $95 million. Last year China’s trade in goods alone was $3.9 trillion. US-China trade in goods and services came to $536 billion.

There was no investment by either country in the other in 1972. Now there is investment by American companies everywhere in China. Our states and localities are pushing for some sort of Open Door policy for Chinese investment in the United States. A Chinese company is about to bring home the U.S. bacon and Smithfield ham, and, with them, better standards of food safety for Chinese consumers.

In 1972, there were no Chinese tourists or students in the United States or anywhere else. A few hundred Americans visited China. This year there are over 200,000 Chinese studying here. Almost 2 million Chinese tourists will visit and over 2 million Americans will go to China.

This has become a very consequential relationship and it’s becoming more so. Having just waxed uncharacteristically numerical, I want to assure you that, while there are many references to facts and figures, there are no dreary charts and graphs or statistical recitations in “Interesting Times.”

The book does, however, explore how China transformed itself by inventing something I call “cadre capitalism” – otherwise known as “socialism with Chinese characteristics.” Ideological skittishness means that cadre capitalism is not much analyzed in China. Ideological preconceptions make it greatly misunderstood here and elsewhere abroad.

Cadre capitalism links local boosterism to economic entrepreneurship and then links both to the promotion of individuals to higher levels of the Party hierarchy. It creates self-interested, selfish partnerships between local officials and business people. They collude to advance local political, economic, and commercial interests over those of other such partnerships elsewhere. This drives so-called state-owned enterprises to ferocious competition with each other and everyone else.

Cadre capitalism makes doing business in China quick and easy for those who understand and participate in it and hard for those who don’t. It’s a unique artifact of Chinese culture. It can’t be exported as a model or borrowed abroad. Perhaps that’s just as well. If corruption is at heart the result of an inability to separate personal interests from public or enterprise interests, then cadre capitalism promotes corruption as well as the energetic pursuit of profit.

China’s astonishing economic success has led lots of people to envy it. But most economists and – more important – China’s leaders believe that the model that produced this success is obsolete. The country is now entering a decade-long era of restructuring and reinvigoration to enable it to cope with the many challenges its successes have created, including huge environmental damage, overdependence on export markets, overinvestment and under-consumption, abuses of monopoly power, over-regulation, burgeoning local debt, and inadequate financial support for China’s booming private sector. China plans reforms of its monetary system, capital markets, and taxes. The list of proposed reforms has twenty-two items on it, in seven economic sectors. We won’t know the details of the first set of reforms or how bold or timid they are until November at the earliest. That’s when the Communist Party is scheduled to have its next plenary session.

I’d bet on bold ideas, implemented incrementally and cautiously. There’s a reason that Deng Xiaoping favored what he described as “feeling one’s way across a stony riverbed with one’s feet.” China has very little margin for error. It needs to tread carefully as it adopts new ways of doing things.

China’s leaders are haunted by their country’s horrifying history of pestilence, severe famine, and violent subjugation by foreigners. China must feed, clothe, and house twenty percent of the world’s people on less than ten percent of its arable land, with only seven percent of its water. For almost four hundred of the past thousand years, foreign invaders ruled China. As recently as 1931- 1945, as many as thirty-five million Chinese died as Japan tried to conquer their country. At least seventy million more died from internal rebellions and disorders over the century between the second Opium War and Deng Xiaoping’s repudiation of Mao’s totalitarian utopianism.

There is not a country anywhere on the planet that would exchange its geopolitical circumstances for those of China. China shares land borders with fourteen countries, including some very tough customers, like Afghans, Indians, Koreans, Mongols, Pakistanis, Russians, and Vietnamese. The Japanese, Taiwanese, and U.S. navies are just off China’s coasts, where the Indian navy has also begun to make occasional appearances.

China’s human and natural history as well as its geography make its leaders risk averse. They are conservative and cautious in their management of their country and its foreign affairs. Even if China had an ideology or political-economic system it could export (which it doesn’t), its leadership would still be very conscious that they can’t afford to make mistakes at home or abroad.

All this is in effect the answer to the second question I posed. Can China displace the United States as a military colossus in command of global affairs? Does it want to do so?

China’s multiple past wounds and present vulnerabilities are about as solid a guarantee as one could hope for that it will continue to be interested mainly in its own domestic tranquility and prosperity. It will continue to wait for foreigners to come to it for enlightenment, not pursue them to impose Chinese ways on them. Chinese have never been astonished by the well-known fact that foreigners are incorrigibly barbarous. If we and other benighted peoples continue to fail to appreciate the superiority of China’s way of doing things, Chinese will just write us off as boorish and uncultured. They will shake their heads in disbelief at the ignorance and poor judgment that make us foreign, and go on about their own business.

This brings me at last to “the Pivot” – the proposed rotation of American forces and shift of foreign policy attention to East Asia from points West. The first thing our government tells us is that the pivot is “not about China.” Of course it’s not about China, except when it is – or when there are no Chinese in the room to listen to us as we figure out how to turn our attention to the Indo-Pacific while simultaneously bombing Syria and/or Iran and continuing our crusade against militant Islam.

Strangely, we are having trouble convincing others in Asia that we’re really going to drop things elsewhere to help them balance China’s rising wealth and power not just now but over the long haul. We’re also having trouble convincing the silly Chinese that, despite everything we’re doing, it’s not our intention to remain in position to assault them from their own near seas or to keep them from having much say in what happens in their neighborhood. They just don’t seem to appreciate that we feel threatened by their belated attempts to complicate and frustrate foreign attack and undermine our omnipotence. We demand that China swear off all acts that undercut our ability to overwhelm it! We, not they, properly call the shots in East Asia. To underscore this point, we now propose to build a trans-Pacific free-trade zone that excludes China, even though it is every Asian and Pacific country’s largest trading partner.

The trouble with foreign affairs, I guess, is that it involves foreigners, who are by nature inscrutable and inexplicably disinclined to recognize our inherent benevolence as Americans.

The Chinese and others need to understand that we Americans have no choice. There’s no one else who can do what we can. So we must pivot to the East. God is on the side of the big economies and that’s where they’re beginning to be and that’s where China is too. We need to deploy our military to do something about this, even if it’s not clear exactly what economic problems an American military build-up might solve other than keeping our defense spending up while our allies keep theirs down. But military build-ups are as American as the Colt revolver and the Lone Ranger. So redeploy we must.

The problem is that China may be on the verge of developing an autistic government with a bloated military budget, a bad habit of exempting itself from international norms, and a preference for applying coercion rather than diplomacy to those who annoy it. Perhaps, in time, China will even develop some sort of ideology it can seek to impose on others with the fervor of a gang of Jehovah’s witnesses or democracy promoters. Some might say that our problem boils down to a well-founded fear of China becoming more like us. Does the world have room for another country that is strong at arms but a bit weak in the head and convinced that bombing foreigners is both an act of humanitarian assistance and the surest path to peaceful coexistence with them? We doubt it.

Americans who are nostalgic about the Cold War and eager to reenact it look forward to China mirroring us to become a true “peer competitor.” That may not include a critical mass of people in this room. But, just think! A China that modeled itself on America would justify sustaining our own bloated military budget, cure our enemy deprivation syndrome, and return us to the welcome simplicities of some sort of bipolar struggle for global dominance. For the leprechauns of the military-industrial complex, such a China is the pot of gold at the end of the congressional rainbow. So we propose to swing our military away from West Asia (the Middle East) and rebalance it to East Asia.

China’s bankers, unlike its military, seem curiously relaxed about this possibility. Perhaps it’s because they own so much American debt they can’t help noticing that we have a budget problem we are addressing by mindless disinvestment – cutting everything equally so as to avoid having to make choices or set priorities. If the United States can’t prepare itself for the future, make choices, or set priorities at home, why worry about it doing so abroad? As long as there’s an Israel Lobby to set Washington’s foreign policy priorities for it, what’s the real chance that China – as opposed to angry Arabs and militant Muslims – will become Enemy Number One for Americans? And, if Asia deserves more attention because it’s becoming the world’s economic center of gravity, will a militaristic “Pivot” affect that reality, or just waste money?

So the best bet in Beijing – like the worst fear of the military-industrial complex here – is that America’s “Pivot” will turn out to be just another blast of boastful babble from the Beltway bubble’s bureaucrats and their bloviating bosses. Of course, the People’s Liberation Army can’t be sure about that, so it will prepare for the worst. What this means is that China’s ability to fend us off will improve even if our ability to bludgeon it into submission doesn’t. This is how wasteful arms races are born. This time around the competition is with a country that does seem to know how to set priorities and whose economy is about to be bigger than ours. Despite our unmatched military capabilities, the “Pivot” strikes most America-watchers in China as too clever by half – more self-licking ice-cream cone than military menace. I suspect they’re correct.

Most likely, the “Pivot” will turn out in the end to have been part pirouette, part bluff, and part fiscal fizzle. That’s too bad. It is entirely appropriate for the United States to pay more attention to East Asia, including to shifting military balances. These involve more than the return of China to its pre-modern weight in regional affairs. Since 1945, Japan has achieved wealth, international respect, and an unsung but formidable self-defense capability. It has been followed on this path by the southern half of Korea, India, and most of the ASEAN nations. Countries like Singapore punch above their weight and, as Americans and Chinese have both learned, Vietnam is no pushover.

It is true that China is now rising, but there is no vacuum along its borders. The task before us is not to build a military Great Wall on China’s East and South, but to facilitate graceful adjustment by China’s smaller neighbors to its renewed prosperity and military vigor and by China to their wealth, power, and independent sovereignty. This task makes a robust American presence in the region desirable for some time to come. But adjustment to new regional realities will not be advanced by U.S. policies that obviate the responsibility of Asian nations to mount their own effective efforts at self-defense or that discourage their establishment of mutually respectful relationships with China, India, and other regional powers. If China’s behavior stimulates its neighbors to come together to limit its influence, this a problem for China, not one for us, still less a reason to expand our military presence in Asia.

Forty-one years ago, Richard Nixon reopened relations with China and ultimately catalyzed China’s return to wealth and power. Perhaps a word from the master is in order. In dealing with the changes since 1972, the United States should be guided by the Doctrine Nixon articulated at Guam on July 25, 1969. This put forward three principles:

“First, the United States will keep all of its treaty commitments.

“Second, we shall provide a shield if a nuclear power threatens the freedom of a nation allied with us or of a nation whose survival we consider vital to our security.

“Third, in cases involving other types of aggression, we shall furnish military and economic assistance when requested in accordance with our treaty commitments. But we shall look to the nation directly threatened to assume the primary responsibility of providing the manpower for its defense.”

That was sound policy then and it is sound policy now. I’d add only that, for the United States to meet the economic challenge of a rising, competitive Asia, we need policies that leverage Asian prosperity to the benefit of our own. If we try to divide Asia to suit our geopolitical convenience instead of accepting, accommodating, and buttressing its new balances of power, we will end by dividing Asia from ourselves. That would undercut both our prosperity and our global and regional influence. It would also necessitate an even higher level of defense spending than the unaffordable one we now have.