June 10, 2011

Cold War thinking on Chinese-US relations

Filed under: China, Economics, History, USA — Tags: , , — Nicholas @ 09:13

Brad Glosserman asks if China is using its new-found economic muscle to bankrupt the United States.

One popular narrative credits the end of the Cold War to a US strategy to bankrupt the Soviet Union. Well aware of the advantage conferred by its superior economic performance, Washington pushed Moscow into a military competition that drained the USSR of its resources. In this narrative, US President Ronald Reagan’s push to create a missile defence system — realistic or not — was the straw that broke the Soviet back.

Are Chinese strategists pursuing a similar approach to the United States? Is Beijing pushing US buttons, forcing it to spend increasingly scarce resources on defence assets and diverting them from other more productive uses? Far-fetched though it may seem — and the reasons to be sceptical are pretty compelling — there is evidence that China is doing just that: ringing American alarm bells, forcing the US to respond, and compounding fiscal dilemmas within the United States. Call it Cold War redux.

If that is indeed China’s strategy, then they’re wasting their efforts: without strong action in the very near term, the US government is going to bankrupt the country with no additional help from overseas required. The “popular narrative” Glosserman refers to handily glosses over the fact that the Soviet economy had been on a downward slide for decades. The Reagan-era military build-up merely hastened the end for Soviet economics, it did not bring it on in the first place. As Adam Smith famously noted, there is a lot of ruin in a nation, but eventually it does go smash — especially if no efforts are made to avert that nasty ending.

H/T to Jon, my former virtual landlord, for the link.

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