Oct 27th 2008

Biden doctrine: Let's start with China

by Sol Sanders

Sol W. Sanders, (solsanders@cox.net), is an Asian specialist with more than 25 years in the region, and a former correspondent for Business Week, U.S. News & World Report and United Press International. He writes weekly for World Tribune.com and East-Asia-Intel.com.

In a world of unexpected crises and unanticipated consequences, the new president of the United States is as likely as his predecessors in the past to face almost immediate and overwhelming crisis or crises come January.

According to the Biden Doctrine [that's the one outlining the geopolitical problem not the other domestic political problem of the senator from Delaware's endemic lapsus calami], if Sen. Barrack Obama is elected president, he will within six months face a deliberate attempt to test his abilities. Rightly, Biden referred to the young President John F. Kennedy's May 1961 encounter at Vienna with Soviet Dictator Nikita Khrushchev. But he left out the sequel: the generally accepted belief that it was JFK's self-acknowledged failure to stand up to burly Nikita Sergeyevich's tongue-lashing which fed Khrushchev's audacity in creating the basis of the Cuban Missile Crisis and a near Armageddon for the civilized world a year and a half later.

It is more than likely that Sen. John McCain, too, were he to be the president would have to meet that kind of crisis as leader of the most powerful country in the world, held responsible by its friends and enemies for much of what happens in this disordered universe.

Many predictable possibilities for trouble lies in the nature of the vast array of problems around the globe. But like so much political punditry that goes on today, prediction is largely hindsight. In fact, world crises have a way of developing incrementally and imperceptibly for those in power, that is in a drip, drip, drip fashion until the total becomes an unavoidable problem that has to be dealt with immediately. Nothing is so characteristic of that kind of long series of events over a number of presidencies than what finally led up to the 9/11 attack. That process also applies to the inevitable tortured American response. However many twists and turns it has taken, and however much President George W. Bush's pursuit of it has been criticized by some of his contemporaries before historians later have their say, it has been an extended and complicated process with many unanticipated jerks and detours.

But in any systematic attempt to examine the possible areas where the new president will encounter a provocation, one must turn to the general problem of Washington's relations with China.

It could be argued that historically for over 150 years, no bilateral relationship has presented more difficulties in reaching a steadily evolving pattern of normalcy than with China. Americans have rarely been able to see its relations with the Chinese in less than apocalyptical extremes - whether the greedy merchant salivating over the supposed millions of Chinese customers or the missionary plate being passed among pious believers for conversion of "the heathen Chinee". On the Chinese side, of course, chaos has marked much of that period, an unspoken cloud of recognition that hangs all Chinese policymakers and the elite.

Despite some preliminary boasting to the contrary by the Chinese media - including quotes from academics and economists who should have known better - it was always clear that the ripples of the Wall Street mortgage market disaster would reach China. And it was equally clear they would be considerable if not all known.

In fact, the Chinese were already engaged in a bitter internal Chinese Communist Party economic policy debate when the impact of the worldwide financial crisis hit full blast. That debate revolved around a stark dilemma:

The political rationale for the regime has increasingly depended on the gains through rapid economic growth for an expanding elite - if small in relative terms - generated by the partial liberalization of the economy during the past three decades. This ethos ["to get rich is glorious" according to paramount Leader Deng Xiaoping] has replaced in all but name the ideology of the Marxist-Leninist-Maoist orientation and the traditional Communist goals for such a regime.

At the same time, the rapid growth and demand for goods and services plus external pressures including rising commodity import prices which, ironically, the Chinese themselves had been spiking, had produced a growing threat of runaway inflation. The record breaking food prices - the principal expenditure and concern of most of the population - due to failure of supply has complicated the problem.

The fantastic growth of the economy as a whole by any standard has been disproportionately - again, acknowledged by some of the regime's loyal economists - dependent on its exports. These have been, in no small part, an assembly of higher cost component imports from its more sophisticated Asian neighbors, Japan, Taiwan and South Korea. These exports and their permutations in the Chinese economy are estimated to constitute as much as a third of the growth in the gross national product, the sum total of all Chinese production and services..

The growing disparities of wealth between the urban and rural areas, between a high living elite and the mass, exemplified even in the booming coastal cities where there is a growing population of poor, itinerant workers, has been seen as a threat to stability - perhaps even a threat to the regime. This problem was reinforced by some of the population harking back to a mythical egalitarianism under Mao.

There was also the problem of the growth of systemic corruption and vast pollution of the environment, both of which have taken on economic significance as well as becoming a major political problem for the regime. It is significant that these phenomena have had to be acknowledged in the tightly controlled popular media.

With the onset of the Wall Street crisis in September and October 2008, the argument inside the Chinese Communist establishment between a policy to continue unrestricted growth and efforts to curb inflation and limit corruption and pollution had not been resolved. There was talk of expanding the domestic market, even of rural reform through another one of the Chinese Communists' endless attempts to control land tenure but get agricultural production. But that, as the Chinese have long ago discovered along with other backward economies, is a long and difficult road.

The argument's resolution, either through policy decisions which don't seem to be forthcoming or by force majeure produced by a decelerating world economy, of course would affect China's relations with the rest of the world. It is as yet not clear how great the impact would be nor in what ways it would mold the attempt of "rising China" at exercising increasing influence as a member of the world community.

For the moment, Beijing has been talking cooperation with Washington and the Europeans in stabilizing the world economy. Conversations on the subject between Bush and Chinese President Hu Jintao have taken place but it seems doubtful that their character was more than window dressing.

But holding more than half a trillion dollars worth of U.S. Treasury securities and another 1.4 trillion in foreign exchange, much of it in dollars, means the Chinese have a stake not only in a world recovery but in U.S. economic stability. Yet one can only guess whether the dregs of their Communist intellectual inheritance, which for all the talk of Marxist dialectic materialism overwhelms the argument for economic advantage among a hackneyed and weak leadership. Bluntly: would the obvious success of the pragmatic switch to a limited market economy for the past three decades trump a desire to try to erode American influence and power in East Asia?

In any event, no decision on economic strategies may now be in the immediate offing for the Chinese. Under the most optimistic scenarios, most economists in America and Europe anticipate there will be a sharp downturn in the principal markets for Chinese products in the U.S. and the European Union. The Chinese economy will suffer. Already the official figures for the GDP dropped in the last quarter into single digits from the double digit figures that have been carried officially for the past several years. Some pessimists on the China scene estimate the drop would be precipitous. Should that be the case, China's major problem of finding employment for the increasing flow of rural poor into the urban economy could become perilous.

Given the general instability of a one-party regime and its enormous emphasis on a military buildup, the new American president could be facing the prospect of an unstable and unpredictable China. Recently Beijing has turned down its boisterous propaganda campaign against the Taiwan regime, encouraged by the defeat at the polls of the more "nationalistic" Taiwan Democratic Progressive Party, whose hard core base calls for formal independence of the Island. Beijing also made a 180 degree switch in what had been a provocative attitude toward Japan, constantly recalling the decades of Japanese militarist aggression and atrocities against China. That continues at least for the moment even in the face of a hawkish new Japanese prime minister, perhaps in recognition of the important role Japan has always played and performs today as a model and trading partner.

But atavistic xenophobia always lies just below the surface in China, and a rapidly deteriorating economy could produce an internal crisis in a Chinese Communist Party facing difficult if not insoluble domestic economic issues. Beijing already has lost much of its control over a corrupt and tyrannical local party structure. It would not be the first time that an authoritarian regime under domestic pressure turned to foreign policy adventurism as a solution to its problem of hanging on to power. After all, what has been the purpose of an essentially poor country with enormous problems spending vast sums on a military establishment against an unseen and unacknowledged enemy?

China's central role in an Asian scene with increasing economic problems is certainly on the coming agenda. That's why the Biden Doctrine bites hard when it comes to speculating on what might face the new president in East Asia.


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