Weeks When Decades Happen:Global Thought Leadership Passes from the U.S.to China at Davos

By+JOHN+ROSS

PRESIDENT Xi Jinpings speech at the World Economic Forum in Davos in late January polarized world media attention to an even greater extent than the high level of interest a visit from Chinas President usually generates.

Typical was the analysis of the lead up to the an- nouncement by the chief political commentator of the Financial Times， Philip Stephens： “Mr. Xis top billing says something about the world. President-elect Donald Trump wants the U.S. to shrug off its global responsibilities. China may grab the opening to move centre stage.”

Ian Bremmer， president of the Eurasia Group， Americas best known “risk analysis” company， concisely summarized the reaction to Xis speech on Twitter：“Davos reaction to Xi speech： Success on all counts.”The reason for such interest is clear – Xi Jinpings Davos visit came at a fundamental historical turning point for the world economy.

In terms of global ideas and strategy， a historical turning point has already been passed with the election of Trump as U.S. President and the U.K. Brexit referendum. But corresponding changes in international relations and global institutions are just beginning. It was this combination that created the intense international interest in Xi Jinpings visit and the reaction to it.

To be exact， Xi Jinpings Davos speech chimed with the worlds understanding of the need for China to show its “thought leadership” regarding global affairs， while in practical fields China is also slowly but increasingly displaying practical institutional leadership. However， the interrelation and different timescales of both should be understood.

The avid attention Xi Jinpings visit attracted was due to widespread understanding of the potential enormous scale of the present turning point in the world economy， with all its geopolitical ramifications. For more than 70 years， from 1945 until Trumps election， the U.S. pursued， at least verbally， a consistent policy supporting economic internationalization – globalization.

Not every U.S. action， however， was consistent with this； there were defects in global governance institutions such as the IMF， but overall the U.S. genuinely pursued globalization. This clear strategic direction， combined with the economic weight of the U.S.， meant that other countries， including China， benefited from globalization. But the U.S. was undoubtedly the worlds strategic economic leader – its “thought leader” to use popular Western jargon.

That Trump clearly breaks with this 70-year-old tradition of U.S. global leadership （at least in his speeches） is therefore of fundamental significance to the entire global economy. It remains to be seen how great the degree of the break in practice is， but a fundamental turning point has already been passed.

There can never again be a 100 percent certainty that the U.S. remains committed to globalization – the fundamental pillar on which the post-WWII global order was built， and which is no longer solid. Of the worlds two largest economies， only China remains unequivocally committed to globalization.

This fact necessarily and profoundly affects every country， due to the decisive importance international trade and globalization has as one of the most power- fully established economic advantages understood by countries both factually and theoretically. Hence the intense international interest in Xi Jinpings speech.

The Positive Correlation of the International Openness of an Economy and Its Development Speed

The growing internationalization of almost all economies was a decisive trend during the long period of relative global international economic stability and growth after WWII – a marked contrast to the 1929-45 global economic fragmentation， marked by the infamous U.S. Smoot-Hawley protectionist tariff， which witnessed the greatest economic crisis in modern world history.

Theoretical understanding of these economic advantages has existed for more than 200 years. The first sentence of Adam Smiths seminal work of modern economics， The Wealth of Nations， from which the rest of its analysis stems is： “The greatest improvement in the productive powers of labour ... have been the effect of the division of labour.”

But division of labor in a modern economy has reached the point where it is necessarily international in scale. International supply chains， which alone ensure the cost-efficiency of modern production， flow from the reality that different countries have different advantages in different parts of production. Attempts to create self-contained national economies inevitably make economies less efficient.

Therefore， every strategy of “import substitution” in the attempt to create a national self-contained economy， whether of a capitalist type （Argentina， Brazil） or a socialist one （the U.S.S.R.）， has failed.

Protectionisms negative effects would hit even the U.S. – the worlds largest economy – increasing prices of imported goods for consumers and producers， while restricting export markets. Even for the U.S.， three quarters of the world market in financial terms， and 95 percent of the worlds customers in people terms， lie outside its borders. A protectionist U.S. economy focused only on its domestic market can never match the advantages of orientation to a global economy.

For Germany， 95 percent of its potential market is outside its borders， for Brazil 97 percent， for Australia 98 percent， and for Thailand over 99 percent. Such countries， therefore， applaud Xi Jinpings unequivocal defense of globalization， not because of deference to China but from national self-interest because globalization really is “win-win.”

Even a notably anti-China analyst such as Philip Stephens therefore notes， “It is a U.S. president who is now bringing down the curtain on the Pax Americana.” As a consequence， Stephens adds： “There is ... an opportunity for China. Classical geopolitical theory has it that， in a collision between established and rising powers， the upstart is the destabilizing force. When the elites of Davos gather for their annual fest of self-congratulatory backslapping， it would be something of an irony were Mr. Xi to appear as the voice for stability.”

These fundamental facts， with their political consequences， are why numerous countries， including American political allies like Germany or Australia， expressed open disagreement， even alarm， over Trumps protectionist statements.

For political reasons， the leaders of these countries will not state openly that they agree more with Chinas positions on globalization than with the U.S. President. While minority protectionist political currents do exist in a number of countries， anti-globalization policies are only in force and being actively pursued in some AngloSaxon countries – the U.S. under Trump and a U.K. which shot itself in the foot with Brexit.

This is why China is now openly acquiring “thought leadership” in the global economy， and why Xi Jinpings speech has aroused such interest. China is not only the worlds second largest economy， but by far the largest that is unequivocally committed to globalization.

Seeing as， for political reasons， key allies of the U.S. can only speak in muted tones， China openly articulates what others think. As Stephens puts it： “China can cast itself as a guardian of global governance and the torchbearer for the open trading system. Mr. Xi champions the Paris Climate Change Accord， defends the international communitys nuclear deal with Iran and expands trade liberalization in Asia ... It is the president-elect who now threatens to upend a decade-long Sino-U.S. understanding that has kept the peace in the Taiwan Strait.”

China Never Confuses Patriotism with Economic Protectionism

In fact this new key position of China in global thought leadership is the culmination of almost four decades of domestic “thought leadership” by the Chinese Communist Party.

In 1978-80， decisive， new， and counterposed economic courses were embarked on by China and the U.S. – Chinas “reform and opening-up policy” and the Wests Washington Consensus/Reaganomics/Thatcherism. But their results were devastatingly different.

China underwent the most rapid economic growth， and the most rapid rise in living standards， of any major country in human history. But within its economic heartland the increasing inequality and failure to accelerate the economy produced by Reaganomics/Thatcherism finally culminated in a political debacle – the retreat into the dead end of Trump/Brexit protectionism.

This rise in Chinas thought leadership inevitably primarily influenced developing countries. For them， one of Chinas greatest contributions to international thinking was not to confuse patriotism with economic protectionism. Deng Xiaopings entire life was devoted to Chinas national rejuvenation. But unlike， for example， Latin American nationalist leaders such as Peron， Deng did not confuse pursuit of patriotic interests with economic protectionism.

The Southeast Asian economies of Vietnam， Laos， and Cambodia， decisively influenced by Chinas economic policies， have for three decades been the most rapidly growing economies in the world after China. Chinas policies now markedly influence Indias economic policy under Modi – making India （together with China） the worlds second most rapidly growing major economy. Chinas economic influence has become widespread in Africa and begun to spread to Latin American countries experiencing rapid economic development such as Ecuador and Bolivia.

No country pursuing the U.S.-promoted “Washington Consensus” achieved anything like Chinas economic growth. But the qualitative new change is that of the shift of the U.S. towards protectionism under Trump which has expanded the impact of Chinas economic course from developing to developed countries.

As Stephens aptly puts it： “Set against Mr. Trumps embrace of ‘America First trade and security policies， Beijings call for a ‘new model of international relationsno longer looks like an attempt to overturn the Western liberal order.”

Chinas Strategic Vision Corresponds to the Interests of Itself and Others

It is necessary not to exaggerate； to understand not only steps forward but difficulties. When the U.S. created the present world order after WWII， it possessed not only “thought leadership，” a strategic way forward， but massive institutional power.

The first contrast today is military. In 1945 the U.S. possessed unquestioned military technological leadership as the sole country possessing the atomic bomb. China still does not possess the same global military strength as the United States. Both Obama/Clintons“pivot to Asia” and the new Trump administration， therefore， openly seek to use U.S. military strength to pressure China

Economically， in 1945 the U.S. accounted for between 30 and 50 percent of world GDP – depending on the method of calculation. China today does not have such weight. It is the worlds greatest goods trading nation， but represents only 15 percent of world GDP at market prices and 17 percent in purchasing power parities. China cannot impose its economic positions on the world as de facto the U.S. could in 1945.

Today China can take successful partial or regional economic initiatives – the Asian Infrastructure Investment Bank （AIIB）， the New Development Bank （BRICS bank）， and the Belt and Road Initiative. But China cannot yet create an entire global institutional framework as the U.S. did in 1945 with the IMF， the World Bank， and a global monetary system based on the dollar.

If， in 1945， the U.S. possessed not only strategic thought leadership but also overwhelming institutional power， China today possesses the former but not the latter， and nor can it create it in any short-term framework. What conclusions follow for the international dynamics of those that listened to China at Davos and after？

The answer lies in the interrelation of Chinas strategic vision with the national self-interest not only of China but other countries. At Davos， other countries naturally listened closely to discover how Xi Jinpings outline of Chinas perspective affects their own coun- tries. But Chinas strategic strength is that its fundamental economic vision precisely corresponds to the interests of other countries as well as itself， in a way Trumps no longer does. It is therefore crucial that China articulates this in the clearest terms.

China sets out a strategic path which corresponds not only to its own national self-interest but to those of other countries. Whether， for tactical reasons， leaders of other countries choose to say it publicly or not， other countries understand that the protectionism now dominating the new U.S. administration is an economic dead-end. Other countries will either silently or publicly agree with what Xi Jinping has said on globalization. In short， Chinas president will have the silent or vocal agreement of the majority of those listening.

The Guardian noted that， somewhat surprisingly， a quotation from Lenin has become widely used in the West to analyze the tumult created by Trump： “There are decades where nothing happens and there are weeks where decades happen.” But this apposite quotation relates to another that Lenin took from Marx – the analogy of the “old mole，” of a prolonged process taking place under the surface before breaking suddenly into the light of day.

The “weeks when decades happen” – the sudden crisis created by Trumps election， the consequent intense interest created by Xi Jinpings Davos visit – occurred because， under the surface， a fundamental process had been occurring for decades which “suddenly” broke into the light. This was the success of Chinas economic policies and the failures of the economic policies of the Anglo-Saxon economies.

The “sudden” explosion of Anglo-Saxon economic“madness” in 2016， of Trumps protectionism， and Brexit， was simply the coming to the surface of these processes that had been maturing for decades. The intense spotlight turned on Xi Jinpings speech， and Chinas becoming the center of world economic attention， therefore， is the culmination of decades during which the Chinese Communist Party out-thought the West.

The rapt international attention Xi Jinpings visit to Davos received is ultimately the result of the fact that Chinas economic policies from 1978 onwards led to unprecedented economic growth while the economic policies of the Anglo-Saxon countries have now led them into a protectionist economic debacle. China， or to be precise the Chinese Communist Party， far out-thought the West.

There are indeed “weeks when decades happen.”This years Davos witnesses a palpable passing of global economic “thought leadership” from the U.S. to China. But this has only occurred because for more than three decades the economic mole has been doing its subterranean work.