Martin Wolf at FT on the Rapid Rise of the PRC

Martin Wolf is perhaps the best analyst of overall economic, political and social phenomena in the daily media, with more gravamen and perspective than silly frauds like Tom Friedman at the NYT will ever summon up with his limited mental capabilities. Here's an abrupt summary in the middle of Wolf's summary of China:

....we have to recognise what the rise of China does obviously mean.

First, we are seeing the end not only of the brief period of the US vision of itself as the “sole superpower”, but, more broadly, of centuries of western domination. The rise of India, though closer the west, as the world’s largest democracy, reinforces this transition. Over the next few decades a west in relative decline will be forced to co-operate with the rest of the world. This is a good thing. But it will create huge challenges.

Second, China is not only non-Western, but has a distinct history, culture and political system. The latter may be the most important point. It is hard to sustain trusting relations with a country whose government mistrusts its own people. It is no less difficult to enter into binding agreements with a government that cannot accept the fundamental principle of the rule of law – that the law binds the state to the people as much as the people to the state.

Third, we have to recognise that transitions of power always create huge frictions, with the incumbents trying to protect what they see as the “natural” order of things and the insurgents resentful of always delayed recognition of their rising power and status.

Wolf's entire article is in the form of a question, and he invites questions from FT readers over the following scenarios:

...how might this end? I envisage three possible outcomes.

First, the “positive sum” view wins out. Awareness of the absence of any deep ideological conflict, of mutual economic dependence, of a shared planetary destiny and of the impossibility of war in a nuclear age force adequate levels of global co-operation. For this to happen there must also be a profound commitment to co-operation, not much evident recently in such areas as climate change or global imbalances.

Second, the “negative sum” view wins out. Power is relative. The incumbent and the rising powers compete for dominance. Resources, similarly, are finite. In this world, economic disarray and the struggle for scarce resources lead to a retreat from globalisation, while balance of power politics dominate international relations. We may see the emergence of a balancing coalition against China, consisting, at the least, of the US, Europe, India and Japan, possibly joined by other powers.

Third, we muddle through, with a mixture of the above two approaches: globalisation and a degree of economic co-operation survive, but classic balance of power politics become more significant, as China, in turn, becomes more assertive of its rank in the world system. This, roughly speaking, was the world before the first world war – not an encouraging precedent.

While the US's status as the world's paramount economic power since 1890 will be rapidly overtaken by China, the great advantages in technology and productivity will keep the US in a per capita position as the best place to live and work for decades to come, absent a catastrophic turn of events. Size matters, but China readily admits that its economic power is nowhere near the political and military power of the US. How long this state of affairs can last is the subject for debate.

In the meantime, the US economy appears headed towards a statist end-game of no-growth entropy and redistribution of income---a division of a pie constrained by entitlements to remain in long-term stasis rather than an expanding pie of economic and other sorts of growth. The only thing we can say for sure is: "The future lies ahead."