WSJ on whether Chinese growth is good or not

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Date Tue, 28 Jun 2005 07:20:48 -0500
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Is China's Rapid Economic Development Good for U.S.?

27, 2005; Page B1

Chinese oil company Cnooc Ltd.'s takeover bid for Unocal Corp. has brought
into sharp relief two opposing American views on China's rapid economic

Many in Congress and the Pentagon think it may hasten an inevitable clash
between the U.S. and China for economic and political leadership in the
world. Many businessmen and academics, however, think China's growing wealth
and international economic ties will make it more democratic and a force for
global stability. Both have history on their side.

Brad DeLong, an economic historian at the University of California at
Berkeley, sees a useful parallel in Britain's policy toward the emerging
industrial colossus of the United States in the 19th century.

As late as the 1840s, he notes, the U.S. and Britain -- then the world's
sole superpower -- came close to war over territorial disputes in the
Pacific Northwest and the lucrative fur trade there. But in subsequent
decades Britain chose to accommodate, rather than suppress, the U.S. By
1900, the notion of conflict was widely regarded "as silly, simply because
the trade and economic connections were so tight and the political systems
so compatible," Mr. DeLong said.

Similarly, he argues the world will be safer if the Chinese in time see the
U.S. as having aided, rather than hampered, their economic development.

History, though, also offers counterexamples. Germany was catching up to
Britain at the same time as was the U.S. but that relationship ended in war.
Similarly, Japan was more open to imports and foreign investment before
World War II than after, yet its rapid industrialization, especially later
under a nationalist military government, ultimately made it a more
formidable adversary of the U.S.

"There is no deterministic relation" between economic advance and war or
peace, said Charles Maier, a Harvard University historian. Katherine
Barbieri, a political scientist at the University of South Carolina, has
found that countries that trade more with each other are actually more
likely to fight, in part because deeper relationships generate more things
to fight about. "Trade generates wealth but...certain countries may take
that wealth and direct it to military purposes," she said. "We're giving
China the power to build a very strong military."

China isn't easy to categorize. It has pursued market-based economic
liberalization, foreign trade and foreign investment to lift its mostly
poor, rural population out of poverty. It has a growing business elite, many
with U.S. educations. Yet it remains a one-party state with a host of
strategic friction points with the U.S.

Since President Nixon led the U.S. opening to China in the early 1970s,
every administration has wavered between seeing Beijing as clear friend or
potential foe. Some Asia specialists within the Bush administration now
worry that the U.S. trade deficit with China, which topped $160 billion last
year, cannot be sustained without political repercussions. There is also
growing alarm, even within the more accommodating State Department, that
China's pursuit of energy resources is propping up unsavory governments in
places like Burma and Venezuela.

Some of the more alarming views of China's intentions will be laid out in a
Pentagon assessment of China's military, which is expected to come out next
week after a long delay and heated internal debate. Defense officials
indicate that the report hasn't been notably toned down through the
interagency vetting process, and will still contain a list of potential
conflict scenarios that some in the White House and the State Department had
hoped to strip out.

The widely differing views of China were vividly evident in 2001 when
military and Wall Street officials came together at the World Trade Center
in New York to share thoughts on the impact of China's economic and military
rise. The organizer, Thomas Barnett, then a teacher at the U.S. Naval War
College, hoped to bring the two constituencies closer together. Instead,
their opposing views were reinforced.

Mr. Barnett, now a writer and consultant, says the Wall Street participants
concluded, "'When I think of the security issues I realize how a strategic
partnership with China is all the more imperative,' and the military guys
would say, 'Wow, realizing all the economic competition, war with China is
that much more inevitable.'"

Americans in general are likewise ambivalent. In an annual exercise, the
Chicago Council on Foreign Relations last year conducted a poll asking the
public to rate their degree of warmth or chilliness toward several countries
on a scale from zero to 100. China earned an average score of 44 degrees, 10
degrees cooler than Mexico but just three degrees cooler than France and
seven degrees warmer than Saudi Arabia.

Even "within China, there are people who think of China's expansionist
prospects and military modernization, and see the country as being something
like Japan or Germany pre-World War II," said Charles Wolf, an Asia scholar
at the Rand Corp., a think tank in California. "Then there are others who
put huge emphasis on the peaceful rise of China."

Mr. Barnett argues that most of Asia's economic success stories had, in
effect, one-party government as China does today: Singapore, South Korea,
Japan, Taiwan. Today, all are important trading partners and pro-U.S.
Meantime, North Korea, which cut itself off from the world, is mired in
poverty and one of the U.S.'s chief antagonists.

History suggests that while economic engagement helps prevent conflict
between countries, by itself it isn't enough. During the 1920s, Japan had
low import tariffs and its democratic, civilian government encouraged
domestic alliances with European and American companies to hasten Japan's
technological catch-up, said Hideaki Miyajima, a Japanese economic historian
at Waseda University in Tokyo and a visiting scholar at Harvard. General
Motors Corp. and Ford Motor Co. operated Japan's only major automobile
assembly plants. The heads of Japan's "zaibatsu" -- urban industrial
conglomerates -- were pro-Western. Many sent their children to U.S.

But these pro-Western elites were too weak to resist the forces of
militarism and imperial expansion. Mr. Miyajima said the Depression fell
disproportionately on Japan's large agricultural population, which was the
military's power base. It increased economic inequality and fueled
resentment of the traditional business elite.

In 1932, military-backed right-wing nationalists assassinated both Japan's
prime minister and one of its leading business figures, Takuma Dan, the
Massachusetts Institute of Technology-educated manager of the Mitsui Group
zaibatsu. In 1936-37, the military completed its takeover and began to limit
imports and foreign investment in militarily strategic industries, such as
steel, automobiles and machinery. GM and Ford were forced to leave; Toyota
Motor Corp. and Nissan Motor Co. took their place.

Germany's rivalry with Britain is similarly complex. In 1910, Norman Angell,
a British economist, wrote in "The Great Illusion" that Europe's great
powers had become so economically interdependent that war was unthinkable.
Harvard's Mr. Maier says the hypothesis was plausible. Britain's old-line
industrial elites saw Germany as a threat, while its emerging financial
elites saw it as an opportunity. Within Germany, Ruhr-based heavy industry
favored the army buildup and were more willing to risk conflict with
Britain, while Hamburg-based trading interests were more pro-British, though
supportive of the German fleet buildup.

British-Germany naval rivalry didn't lead to war itself, says Mr. Maier;
rather, entangling alliances between Germany and Austria-Hungary on one hand
and Britain and Russia on the other, were a more proximate cause.