A Fox in the Henhouse

We all know that China and other illiberal and autocratic countries are opposed to the American-led Western civilization that has dominated the world since the end of World War Two. But most of those countries, barring a nuclear holocaust, can only hope to have a regional impact. Only China has the resources and ability that are necessary to aspire to global leadership. But what kind of world order would China attempt to create to replace America and Western civilization?

The Hoover Institution’s Senior Fellow Elizabeth Economy wrote China’s Alternative Order in the most recent issue of Foreign Affairs magazine to answer that question. She writes that, “The Chinese government wants a system built not just on multipolarity but also on absolute sovereignty; security rooted in international consensus and the UN Charter; state-determined human rights based on each country’s circumstances; development as the “master key” to all solutions; the end of U.S. dollar dominance; and a pledge to leave no country and no one behind.”

Ms. Economy goes on to show how China, through an aggressive and opportunistic diplomacy has essentially captured many of the global institutions of the Western inspired world order such as the World Health Organization (that covered up China’s involvement in creating Covid-19), Interpol (using red notices to harass dissidents outside China) and using the UN charter as cover for civil rights abuses.

But although China’s vision for the future is not surprising, their wish list seemed familiar to me. I recently published a commentary, The Specter of Nationalism (April 25, 2024) that spotlighted a rising new movement, National Conservatism, that echoes many of the same points promoted by Xi Jinping. National Conservatism rejects Enlightenment values and principals emphasizing national interests, protected national markets and cultural uniformity. National Conservatism rejects widespread immigration. Thus National Conservatism mimics many of the core America First campaign themes of Donald Trump’s Republican Party. But that means that National Conservatives, known as NatCons, (and by implication America Firsters) share many of the same ideas as Xi Jinping’s China. The Chinese could name their idea national socialism but that name is already taken – by the Nazis.

These are not new ideas. I ran into something similar when I was first posted overseas in Mexico City (well technically not overseas). Back then we called it import substitution. And back then Mexico matched perfectly with National Conservatism’s vision. High tariff barriers made imported goods very expensive, but in Mexico’s protected market domestic products were shoddy and didn’t work very well. If you wanted to buy a TV your choices were a crummy Mexican TV, an outrageously expensive imported TV or you could go to the Tepito Market and buy a smuggled TV. Most people went to Tepito.

Import substitution strangled the Mexican economy and everything else it touched. Favoring domestic production meant that the government had not only erected high tariff barriers, but the government determined which industries it wanted to support and passed regulations to limit competition and passed out subsidies to favored companies (sounds a bit like the CHIPS and Science Act of 2022, doesn’t it?). Because companies realized that they did not have to worry about competition and that their profits came from government and not from fulfilling needs of consumers, business leaders plied politicians with money to assure the continued flows of government largesse. Corruption was rampant in Mexico and other developing countries that relied on the import substitution model. And because the party in power had been so beneficial to the business leaders they poured money into politics to keep that party in power. In Mexico, the Institutional Revolutionary Party (the Spanish acronym is PRI) remained in power for 70 years until the economic collapse in 1981 brought on the Lost Decade that decimated the economies of developing countries.

Import substitution is part of a mercantilist economic policy. Mercantilism is an economic form of warfare that assumes world trade is a zero sum game. It assumes that a trade surplus is winning against other countries and that a trade deficit is losing big time (Hmmm, where have we heard that before?). Mercantilist powers colonized countries for their raw material resources which were exported to the mother country for processing and shipped back to captive markets in the colonies. The American Revolution was in reaction to the heavy hand of Great Britain’s mercantilist policies. Adam Smith’s The Wealth of Nations (published in 1776) sharply criticized mercantilism.

China is a mercantilist fox in a free trade henhouse. China has followed an asymmetric mercantilist policy ever since Nixon’s visit. China’s mercantilist policy has been very successful, raising an extremely poor agricultural country into an industrial powerhouse. The American led rules-based world order and the free trade policies it endorses is based on trust among the market participants. The US and the West condoned China’s predatory mercantilism perhaps believing that letting them join the World Trade Organization would help them see the benefits of playing by the rules. It didn’t.

Free trade is great but it is not without its problems, especially if some countries are allowed to flaunt the rules. Efficient production is also fragile production, as we found out during the Covid pandemic. And in a dangerous world we need secure supply lines. Western principles and free market economics made the entire world a safer more prosperous place in which to live. Right now, in the 21st century, it seems that those Western principles and free market economics have gotten off track. But reversion to the great power politics as proposed by Xi, Putin and others (a world order that led us into two world wars and killed hundreds of millions of people) is not the way to solve our current problems.

__________________________________________________

So if the multipolar world envisioned by Xi Jinping, National Conservatives (along with America Firsters) and others such as Vladimir Putin and Kim Jong Un seems scary and dangerous it is because it would be very dangerous and very scary. And if America retreats from global leadership, that is the world we will be getting. But how should the United States face these new challenges?

Generally, the Western world order has served the world pretty well, although not perfectly. Longevity improved, health improved, infant mortality was reduced and slavery prohibited. Great power conflict has been reduced, regional wars limited and genocide prevented. Science, technology and free market economies have reduced poverty and increased prosperity around the globe. All the wonderful things Steven Pinker wrote about in his book, Better Angels of our Nature.

The West made a lot of mistakes but over time we learned from our mistakes and things got better. After the end of World War Two we tried to make the world a better, safer place but we made some mistakes along the way. The development of the Western rules-based order was premised on the notion that the Enlightenment values and principles on which America was founded are universal values and principles and that all nations would prefer to participate in such a beneficial order. But Western principles while popular, as attested to by migrant flows toward countries based on those principles, are not universal.

Some cultures hold other values and principles and are not willing to give them up easily. People in some other countries are not ready to assume the responsibilities such principles require. They lack a history of self-government and good governance. The big mistake we made was creating international institutions such as the United Nations based those Enlightenment values but allowing countries that did not share those values to become members. Perhaps we need a new Bretton Woods Conference to create a new set of international institutions to meet the needs of the 21st century. These institutions should be founded (or re-founded) upon Western Enlightenment principles and values to eliminate the mission creep of the original post World War Two institutions that have been captured by non-Western nations. Membership would be limited to countries that share those values.

NATO has been successful in keeping Europe at peace. This is in great part because NATO membership is limited to countries that share our Western values (although Turkey is a bit of an outlier). But the dangers facing Western countries are now global so NATO must be transformed into a Western alliance that includes Israel, Japan, Korea, Australia, New Zealand and possibly others. A Western trade organization should be formed as a counterpoint to a World Trade Organization that suffers from rampant abuse. In the current global environment we need to replace efficient trade relations with resilient trade relations that include friend-shoring, secure supply lines and limitations on sales of strategic materials.

I am not recommending a military confrontation or trade war with the rest of the world. But we do need international institutions that are committed to our shared Western values while maintaining good relations with other countries around the world. The combined militaries and economies of this grand Western Alliance would be the strongest in the world and would provide peace and prosperity to our people. People around the world will want to  immigrate to such peaceful and prosperous countries but immigration should be limited to only those people who share our values. Currently, people that do not share our values are allowed to become citizens of the United States by swearing an alternative Oath of Allegiance. No more. Other countries would see the benefits that our values provide and would want to associate with the Western Alliance. Fear of Russia or China is not sufficient to join the Western Alliance. But we can create a list of requirements that countries must achieve in order become qualified for favorable treatment, similar to the process to qualify for a Millennium Challenge grant.

Countries that do not share our values would still have access to our markets, but subject to some restrictions and possibly tariffs. A Western oriented trade organization could evaluate and place restrictions on countries that employ slave labor, sell cheaply to bankrupt competitors (known as dumping) or import technology for military purposes. Aggression against alliance members would not be tolerated and international trade routes would be kept open for all countries.

The poet Robert Frost said, “Good fences make good neighbors.” He was right. People need to know where the boundaries are. The current international order has muddled all the boundaries, which makes confrontation and conflict inevitable. Including non-Western countries in Western institutions does not make those countries more Western but does make those institutions ineffectual or counter-productive. It is time to remake the international order based on America’s founding principles and that will require America to shoulder the burdens of leadership. But the alternative is unacceptable.