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Herb Rothschild Jr.: China's challenge to neo-liberalism

In the second presidential debate, both candidates were asked about how we should deal with China. The question requires far better responses than either of them provided. In the coming years, our relationship with China will bear graver consequences than any other.

I’m not qualified to pronounce on the numerous policy choices we must make beyond saying that the worst way to frame them is in Cold War terms, with China replacing the USSR as the rival superpower we must overcome. If military thinking dominates, our policies will be guided by that assumption, because to the Pentagon hammer every challenge resembles a nail. Planning for a war is easier than harmonizing the several aspects of our economic relationship and coordinating our diplomatic relations with China with our relations with other countries in the region, notably Japan, the two Koreas and Taiwan (which China insists is not a separate country).

Under Obama, our policies toward China were internally conflicted, and under Trump they’ve been characteristically erratic. His most sustained efforts were made in trade relations, which bore mixed results — our trade deficit with China hit an all-time high of $419 billion in 2018, then fell in 2019 to $345 billion, just below that of Obama’s last year. This year his effort to blame China for our huge COVID-19 death toll has created mutually bitter feelings. Biden will start from a difficult place.

Even more than our economic dominance, China’s remarkable economic achievement has challenged what we’ve considered our ideological dominance. We’ve long believed that economic prosperity and individual freedom were entangled causally, to which the relative poverty of the U.S.S.R. and the absolute poverty of Maoist China lent credence.

Beginning in the 1960s, the Chicago School, led by the Austrian-British F.A. Hayek and the American Milton Friedman, maintained that the essential individual freedom was choice in the marketplace. They stigmatized any government intervention as a step on the road to totalitarianism. With Margaret Thatcher in the U.K. and Ronald Reagan here, this neo-liberalism gained political as well as intellectual ascendency, and the collapse of the Soviet Union was regarded as its incontrovertible confirmation. After that, no theory supposedly could challenge the assertion, admittedly stripped of Hayek’s and Friedman’s nuances, that capitalism, human rights and democracy were inherently intertwined.

Anglo-American neo-liberal triumphalism can’t survive China’s success at blending capitalist development with totalitarian rule. In this regard as well, then, China’s rise presents us with a choice between Cold War thinking and taking a global and historical perspective. The latter can generate long-overdue recognitions of the far-from-democratic sources of our wealth and the far-from-free transactions in the marketplace.

Technological superiority, driven by individual creativity, most assuredly undergirded the economic rise of England and the U.S. But it was our superiority in the technology of murder that made possible the conquest of large swaths of the globe, the appropriation of non-European lands and their natural resources, and the unpaid forced labor of Africans and indigenous peoples throughout the Western hemisphere.

As for the free market, Hayek’s belief that it is self-regulating and Friedman’s belief that transactions in it are “bi-laterally voluntary and informed” and thus beneficial to both parties ignore inherent asymmetries of power, such as those between employers and workers and between large and small enterprises, which only worsen if government policies don’t moderate them.

Our owner class has benefited from China’s economic success. Our working class would benefit from our rethinking the relation between economics and politics that it should occasion.

Herb Rothschild’s column appears in the Ashland Tidings every Saturday.