Mon, Dec 18, 2023 page9

• Kissingerian realpolitik could haunt US politics next year

  • By Daron Acemoglu and Simon Johnson
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  Even harsh critics of Henry Kissinger concede that then-US president Richard Nixon’s visit to China in 1972 changed geopolitics forever. Before Kissinger orchestrated that diplomatic opening, US leaders framed the world as “capitalism vs communism,” and anyone with communist friends was liable to be labeled a dangerous “Red.” After Kissinger, undiluted Chinese Communist Party (CCP) control was allowed to thrive within the global market system.

  Yet lost amid the celebration of China’s economic “success” were the costs of Kissinger’s China strategy, both in the US and around the world. If former US president Donald Trump is re-elected in early 2025, that strategy would likely prevail, but in a more dangerous form.

  For decades, Kissinger was an outspoken advocate for doing business with China, and he made good money by opening doors there. Among other things, this meant lending former Chinese leader Deng Xiaoping (鄧小平) his support after the massacre of peaceful protesters in Tiananmen Square on June 4, 1989. Less than two months later, Kissinger famously wrote:

  “No government in the world would have tolerated having the main square of its capital occupied for eight weeks by tens of thousands of demonstrators who blocked the area in front of the main government building. In China a demonstration of impotence in the capital would unleash the lurking regionalism and warlordism in the provinces. A crackdown was therefore inevitable. But its brutality was shocking — even more so were the trials and Stalin-style propaganda that followed.”

  That observation was then followed by a paragraph containing the clearest possible definition of Kissingerian realpolitik:

  “Still, China remains too important to US national security to risk the relationship on emotions of the moment. The US needs China as a possible counterweight to Soviet aspirations in Asia, and needs China to remain relevant in Japanese eyes as a key shaper of Asian events. China needs the US as a counterweight to perceived ambitions from the Soviets and Japan. In return, China will exercise a moderating influence in Asia and not challenge America in other areas of the world. These realities have not been altered by events.”

  This became the standard refrain among US foreign policy gurus and business leaders pursuing investments in China. The Chinese economy took off in the 1990s largely because companies based in Hong Kong, Taiwan, Europe and the US fell over each other building factories to employ cheap Chinese labor. Once an economy starts to grow, however, workers would naturally — and reasonably — want more compensation, which could come either from labor market competition or from collective organization and demanding better pay.

  That is what eventually happened in the British, European and American industrial revolutions. While factory owners initially were comfortable using violence to repress workers — as in the 1819 Peterloo Massacre and the 1892 Homestead Strike — political pressure mounted and reforms were enacted. Those changes marked the beginning of shared industrial-age prosperity. Productivity gains started to be shared with workers who were better organized and operating in a more democratic political environment, and technology started being deployed in ways that created more well-paying new jobs.

  For decades, China’s domestic market was small and its main appeal to investors was its essentially unlimited supply of cheap labor — an asset supported by government-funded infrastructure and policies designed to please business owners. With encouragement from the White House, China became the World Bank’s biggest borrower in the 1990s, and was admitted to the WTO in 2001 at the behest of foreign investors and G7 officials.

  China’s boom post-WTO accession was made possible by a deliberate undervaluation of the renminbi — contrary to IMF rules and norms — and continued labor repression. This combination soon led to a surge of cheap Chinese imports into the US, accelerating the decline of manufacturing across the Midwest and other parts of the country, with more than 2 million jobs lost between 1999 and 2011.

  Of course, China’s integration into the global economy allowed it to achieve rapid GDP growth, creating the largest middle class in the world. Yet inequality has skyrocketed, and economic growth has primarily benefited educated and well-connected urban professionals, rather than ordinary farmers and workers, whose earnings remain suppressed. An alternative development path that was less reliant on cheap labor and subsidized exports — as in other parts of East Asia — could have been much better for the Chinese working class.

  Whoever wins the US presidency in November next year, the White House would face an increasingly aggressive China, even as Chinese exports remain essential components for most of what Americans produce and consume. Although Trump talks a big game about standing up to China, his unprincipled, transactional approach represents an intensification of Kissinger’s cynical realpolitik. Like Kissinger, he dismisses the need to defend values such as human rights and democracy.

  Making matters worse, Kissinger’s theory of Chinese history turned out to be entirely wrong.

  “Chinese leaders must realize, or their successors will learn,” he warned in 1989, “that economic reform is impossible without support from educated groups that supplied some of the upheaval’s fervor and from workers who furnished much of the muscle.” Yet, in the event, the CCP used reform merely as an instrument to attract foreign capital and technology. Now that the CCP’s party leadership is more focused on its global power and status, liberalizing reforms have been abandoned — and even reversed.

  Such is Kissinger’s legacy. Rather than building on it, the US and its allies should embrace a more principled approach to China and to trade more generally. That was the original vision of the Bretton Woods agreement in 1944, when it was understood that unfettered access to the US market should be available only to countries with a strong commitment to human rights and political freedom. As the US reshapes its global economic engagement, it must ensure that domestic innovation, investment and employment policies serve the goal of shared prosperity for all US workers.

  Kissinger’s China policy, based on his rather narrow conception of US power, failed to deliver on any of that. Trump, too, is interested only in power — his own. A second Trump presidency would take the Kissingerian mindset to its logical conclusion, benefiting the few at the expense of the many.

  Daron Acemoglu, an institute professor of economics at MIT, is a co-author with Simon Johnson of Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity. Simon Johnson, a former chief economist at the IMF, is a professor at the MIT Sloan School of Management..

  Copyright: Project Syndicate
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