Trump, Totalitarianism and "the banality of evil"

The first course I ever taught, as a Ph.D. candidate at Indiana University in 1973, was on “Totalitarian Political Systems.” I was asked to teach this course after my mentor and advisor, Vaclav Benes, who was to teach the course, had suddenly died. (I was, in fact, with him, when he collapsed of a heart attack).

Benes was the nephew of Eduard Benes, the President of Czechoslovakia, who was deposed by the communists in 1948. In that course, which Benes had designed, I used Hannah Arendt’s book “On the Origins of Totalitarianism” where she used the term “the banality of evil” and discussed how Hitler, Mussolini, and Stalin had used “the big lie,” ethnic nationalism, and bombastic masculinity to win popular support. (Mussolini, in fact, called on the U.S. to “make American great.”)

At the time, I thought this mostly a lesson in history. But it is increasingly clear to me that Trump mimics the tactics, style and objectives of both Mussolini and Hitler, and poses the same threats to the United States that those two had on their countries.

Like

Comment

Send

Share

"Occupy Wall Street" Interpreted for China

Today's issue of Wen Hui Daily in Shanghai includes a long interview with me on the Occupy Wall Street movement. The editors approached me on this topic because of the Chinese publication of my book The End of the American Century. The interview is interesting as much for the nature of their questions as for my own responses (though the latter did tie in very closely to important themes in my book).

Almost all of my responses seem to have been translated verbatim. However, the editors did exclude two items:

1) My reference (in answer "A3") to the 1980 Solidarity movement and the overthrow of the communist government in Poland.

2) The last question (16) and answer, which addressed Obama's commitment to social justice and a reference to Martin Luther King's statement that “the arc of the moral universe is long, but it bends towards justice.”

A link to the original Chinese publication is here.

My original English language responses to their questions appears below.

--------------------------------

Q1:The Occupy Wall Street movement is an event of global political life and social life. How to define this campaign? Is it a carnival, as Zizek worried about? or a media show? or a social movement to fight against financial oligopolies and to protest injustice?

A1. Occupy Wall Street is difficult to define because at this stage it is so amorphous, decentralized, and unfocussed. I would say it is an incipient social movement that captures a widespread sentiment in the United States against inequality and corporate greed, excess and corruption. Like many social movements, it has started out small, but has grown quickly, in terms of number, diversity of participants, and geographic scope. What started in New York has now spread to many US cities, and even to other countries.

But it would be a mistake to view these protests as a major political force, at least at this point. The protestors in New York number only about 1000 on any given day. On most days the Wall Street protests do not even make the front page of the daily newspaper in my city of Indianapolis.

You asked about Slavoj Zizek—the Slovenian Marxist philosopher who joined the protesters this week. But he is almost completely unknown in the United States, except perhaps by a relatively few intellectuals. His appearance at the Wall Street protests was not mentioned in most American news reports.

Nevertheless, I do believe that Occupy Wall Street is potentially very important in the U.S. It is focusing attention on inequality—a problem that has gotten very little attention in this country, but is, in my mind, at the heart of the serious economic, social and political problems the U.S. is now encountering. Wealth and income inequality in the U.S. are at the highest levels in 70 years—since the Great Depression—and are higher than in any other industrialized democratic state.

Q2. Some people think that liberalism in the pursuit of efficiency and profit has dominated the world for more than half a century, and the hands of the history should go to the side of fairness and justice. Do you agree with this? Will this movement really bring new social imagination to the world?

A2. I agree that neo-liberalism has dominated the world for more than half a century, but this is because the United States has been the dominant global power in that period, and the U.S. has demonstrated, exhibited and promoted this model of economic and political development. And it cannot be denied that the American model of capitalism and democracy has been both broadly appealing around the world, and highly successful in many parts of it. The fifty years following World War II were ones of unprecedented growth in global wealth and welfare—much of that fueled by the astounding growth of the economy, consumption, and prosperity in the United States.

But there was a dark underside to that economic growth, which became increasingly evident and problematic in the 1970s, and has accelerated since then. Increasing prosperity in the United States camouflaged a widening rich-poor gap in this country, and globally. Excessive consumption led to a proliferation of debt, both by governments and households. In the pursuit of profits and consumer goods, we increasingly neglected social goods: education, health care, infrastructure, and the environment. All of these are in serious difficulties now.

So in a sense, it is now time to right the balance, and to put more emphasis on fairness, justice and equality. These have always been central to the American ideal, and the American Dream, but have taken a back seat in recent years. I believe this is one of the principal concerns animating the Occupy Wall Street Movement.

Q3. We noticed that many people compare this movement to the events of 1968. But obviously, the Occupy Wall Street movement lacks clear leadership, lacks clear political pursuit, and also lacks a schedule, and a particular solution. Will all of these weaken its real strength?

A3. There are some similarities of the current movement with those of 1968 which, like the Wall Street protest, began mostly with young people. Comparisons could also be made to the recent Tahrir Square protests in Egypt; civil rights protests in the American South in the 1950s and 1960s; and the “velvet revolutions” in Eastern Europe in 1989. I think there are also intriguing similarities to the 1980 strikes in Poland, which quickly mushroomed into the “Solidarity” movement which came to topple the communist government in that country in 1989. (One of my own research specialties is Poland, where I spent much time in the 1980s).

It is true that the lack of leadership, focus and specific demands of the Wall Street movement diminishes its potential impact and power. Maybe these will cause it to collapse. But many of these other social movements mentioned above were also essentially leaderless, at least at first. The demands of some of them—including the student movements of the 1960s, and the Tahrir Square demonstrations—were quite diffuse and general. But all of those earlier movements, like this one, touched a nerve in the broader society, and in the end made significant, even revolutionary, changes in society.

Q4. The two political parties hold different attitudes towards the movement. On the Democratic side many people have shown understanding and sympathy towards the movement. The Republicans are opposite, saying the demonstration was "a battle with the wrong goal". So will these different attitudes lead the protests to be used by different political forces in different ways?

A4. It is true that the Wall Street Movement has been embraced by most Democratic politicians and pundits, and rejected or ridiculed by most Republican ones. However, I do believe the Occupy Wall Street movement has the potential to attract supporters across the political spectrum, from left to right. Let me offer two explanations for this reasoning.

First, public opinion surveys show a substantial majority of Americans have a favorable view of the Wall Street protests. A Time Magazine poll this week shows 54% viewing the protests favorably, and only 23% unfavorably. In contrast, only 27% still have a favorable view of the Tea Party movement. Another poll by NBC and the Wall Street Journal found that 37% of the respondents “tend to support” the Wall Street movement, while only 18% “tend to oppose” it. As I mentioned earlier, I think the Wall Street movement has touched a nerve in American society, and therefore has the potential to become much bigger.

Second, I would argue that there is actually a good deal of common ground and overlap between Occupy Wall Street and the Tea Party. While they are rooted in different segments of the population, and have different agendas, both movements are populist and anti-establishment, and both are reacting against the concentration and abuse of power, and the perceived neglect of average Americans. While I am sure many Tea Partiers are skeptical, and even hostile, toward the “hippies” protesting on Wall Street, I suspect that many of them would agree with the Wall Street Occupation complaints about government policies that favor the rich, the government’s bank bailouts, and the influence of money in the political system.

Q5. Protesting the greedy of Wall Street appears to be the most direct appeal of this campaign. But wasn't it Wall Street financial innovations that brought the United States to gain the leading position in nearly 20 years of global technological and financial competition?

A5. In my view, “financial innovation” contributed almost nothing to the growth of the U.S. economy in recent years. In fact, quite the opposite is true. The awe-inspiring postwar growth of the American economy, and of U.S. global power and influence, was rooted in a combination of explosive manufacturing growth, technological innovation, rapid growth in the standard of living and consumption, rapid increases in productivity, and the expansion of global trade. Banks and financial institutions were important tools in all of this, but it was their security and stability that was most important for these developments, rather than any financial innovations.

Indeed, the rapid growth of the financial services sector of the American economy in the last twenty years is a principal cause of our current economic crisis, and of America’s domestic and international decline. Over the last two decades, manufacturing has steadily declined as a share of the American economy, while financial services have steadily increased. But financial services, per se, contribute almost nothing to the economy. They just move money around. They are based on, and primarily depend on, the accumulation of debt. Banks and mortgage companies encouraged American consumers to take out loans, even when it was unwise for them to do so, because those institutions made money on such transactions.

In 2008, it suddenly became clear that this large sector of our economy was essentially a hollow shell. But because it was so large, the biggest financial institutions—like AIG, Citigroup, and Bank of America—could not be allowed to fail, for fear that the whole economy would collapse. Thus the government bailouts.

Yet now, just a few years later, many of these institutions are thriving again, and their CEOs are receiving compensation packages worth tens of millions of dollars. Meanwhile, unemployment remains mired at 9%, and the average worker in the U.S. is earning no more, in real [i.e. adjusted for inflation] terms, than he or she was twenty years ago.

This is one of the main grievances of the Wall Street Occupiers. Indeed, it angers most Americans.

Q6. After the outbreak of financial crisis, the appeal to reform the financial industry is very high, Obama also argued for increased financial control to win the election, but after he came into power why is it so hard for him to put into practice the regulation of the financial industry?

A6. President Obama did manage to steer through Congress a major reform of the financial regulatory system, the “Dodd-Frank Wall Street Reform and Consumer Protection Act,” in the summer of 2010. This act included the creation of a Consumer Financial Protection Bureau, which eliminates many of the worst practices of banks and credit card companies, which had helped drive so many consumers into debt. The Dodd-Frank bill was passed when the Democrats controlled both houses of Congress. Since the 2010 Congressional elections, which gave the Republicans control of the House of Representatives, any new initiatives in this direction have been defeated by Republicans, who oppose almost any efforts to strengthen the role of government.

Q7. The financial system has become the solid structure of modern society. Many economists think the campaign should not alter this basic framework. Is it because of this that global politicians and thinkers have not been able to put forward an effective alternative when confronting the real world?

A7. As I mentioned before, I disagree with this characterization of the financial system being the core of the modern economy. Banks and financial institutions are an essential tool for the development of modern economies. But their primary role is to provide stability and security so economic transactions and trade can operate smoothly.

The problem is that the financial services sector became a major independent actor in generating wealth based on moving money around, often through complex and obtuse financial instruments like hedge funds and credit default swaps. Many financial institutions became so wrapped up in this money-making sideshow that they undermined their primary purpose of providing stability and security to consumers, investors, producers, and governments.

Q8. People may feel that the government has been hijacked by entrenched politicians and financial oligarchs and increasingly polarized by the two parties. Even President Obama has said that he would rather the country lose than his rivals win [sic?]. For this, will the "occupation Wall Street" movement become helpless in facing this "institutional predicament"?

A8. It is true that money plays a huge and detrimental role in the American political system. Lobbies and moneyed interests play a disproportionate role in elections and policy-making, to the detriment of ordinary citizens. This is one of the complaints of Occupy Wall Street—though it is also of concern to populists on the right, like the Tea Party.

The polarization of politics, and the unwillingness of politicians to compromise, is also hurting the country, and inhibiting efforts to deal with the huge problems we are confronting. I think, though, that the poisoned political atmosphere, as well as the emergence of radical populist movements on both the right and the left, are a predictable response to the protracted economic crisis that we find ourselves in. People’s jobs, homes, standard of living, and economic security are all in jeopardy, and this causes fear and anxiety. Normal politics, and political compromise, are hard to come by in such an atmosphere.

Q9. In the end of the American century, you said, "American exceptionalism" makes Americans believe that poverty and wealth are due to the individual’s faults or achievements, and has nothing to do with the system. Will the campaign lead people’s thinking to the level of the system?

A9. In a big international public opinion survey that I directed some years ago, we found that Americans, more than any other country that we sampled, were more likely to believe that an individual’s wealth or poverty was due largely to his/her own talents or work, rather than to the economic or social system. Americans tend to believe that if a person works hard, he or she will succeed, and that anyone can become rich and successful, even those from disadvantaged backgrounds.

But in fact, there is less social and economic mobility in the U.S. than there was a generation ago. Increases in poverty and inequality over the last several decades are both a cause and a result of this. Children in poor neighborhoods (especially in cities) often go to poor schools, and are more likely to be exposed to drugs and violence. This poses enormous obstacles to achieving a good education, which is essential for success in the work force.

As I mentioned before, I think the major accomplishment of the Occupy Wall Street movement, so far, has been to focus attention on and raise awareness of the issues of economic and social inequality in the United States. As people confront this issue, they will begin to learn more about the systemic aspects of inequality. Mainstream news sources like Time Magazine and The New York Times are increasingly addressing issues of poverty, wealth and inequality. At least in part this is a response to the Occupy Wall Street movement.

Q10. Many young people participate in the "occupation" movement, and US young people have always been defined by their "generation:" the youth after the first world war was called the "lost generation;" and after the second world war was called the collapse generation. Will this one be called the awakening generation because of the "occupation" movement ?

A10. While the Wall Street movement began mostly with young people, it has now spread and grown and become more diverse. The issues that they raise affect almost everyone: witness the growing popularity of the slogan “We are the 99%.” So I do not think that this is primarily a generational revolution, like the ones of 1968. In the U.S. the richest 1% receive about 20% of the country’s income, and control about a third of its wealth--more than the amount possessed by the "bottom" 90% of the population.

Q11. The new media, which takes Wall Street financial innovation as its driving force to develop, such as FACEBOOK, TWITTER, has played an important role in the campaign,. Is this a great irony?

A11. I do not see it so much as an irony, as a function of modern society. Social movements and revolutions have speeded up, like everything else in modern life. Social media and electronic communications facilitated this in Tunisia and Cairo, and are doing so now in the U.S. and elsewhere.

Q12. the participants of this movement also wrote many slogan in Chinese. Is this behavior art of consumerism, or does it show that China provides some dimensions of their thinking?

A12. There are many signs, posters and slogans carried by the protesters, and a very few of these are in Chinese, which has received much coverage in the Chinese media. But I do not think that there is much, if any, Chinese connection

Q13. Winter is coming, so what do you see as the outcome of this movement? What’s the best situation or the worst case outcome？

A13. Bad weather is likely to put a damper on the movement, or at least the most visible manifestation of it—the actual “occupation” of Liberty Square in New York City. But we have already seen the expansion of the movement to many other cities and countries, so it seems to me that the movement has gained some traction, and I doubt that it will disappear anytime soon. If it is to develop as a true social movement, it will need some organizational structure to carry it over. This will be one of the early tests of its staying power. There were some indications of this potential this weekend, when it was reported that Occupy Wall Street has collected some $300,000 through fundraising.

Q14. In "The End of the American Century, you expressed some pessimism about the future of the US. But we also see that American technology, military and finance are still in leading positions globally. For example, the annual global university rankings show that American universities still leads the way in the world. This is one important symbol showing continuing US competitive advantage in comprehensive national strength. So is the view, perhaps, not so pessimistic?

A14. In my book, I argued that the United States has lost its leading or dominant position in almost every area: social, economic, political and international. I present data showing this decline, both compared to our own past, and compared to other countries. I argued that the exploding growth of debt was particularly problematic for the United States, and that the country was destined for a sustained and deep economic downturn. It will no longer be the dominant economic, military and global power that it was in the fifty years following World War II.

At the same time, this does not mean that the U.S. is disappearing as a rich and powerful country. Even if we returned to the standard of living we had in the 1970s, we would still be one of the most prosperous nations on earth. The U.S. model of democracy, and its ideals of liberty, equality and justice, have sustained the country through many crises, and remain a source of inspiration for people all over the globe.

What this means for the U.S., in my view, is that the country will have to adjust to a different global environment—one requiring cooperation rather than dominance—and to an era of reduced growth, reduced spending, and reduced expectations. This is a psychological adjustment, more than anything else, but for that reason all the more difficult to achieve! So far, we have not met that challenge very well.

Q15. You would be on the left flank of United States intellectuals. Be are intellectuals like you the majority or minority in mainstream American society?

A15. The sorts of things I write and say—in particular the notion that the U.S. is no longer #1 in many areas, is threatening to many people. Americans are generally optimistic, proud, and upbeat, and they do not like to hear, and often refuse to hear, messages that are less positive. But I think more and more “intellectuals” are beginning to recognize that the U.S. is in serious trouble, and this is trickling out to the general public. Occupy Wall Street is one manifestation of this.

Q16. Could you introduce an international justice plan under your leadership?

A16. It would be nice, but I am not in a position to do so! I believe that the election of Barack Obama was the best we could do in striving to achieve more justice, both domestic and international. Unfortunately, he was elected in the midst of an economic crisis that will not soon disappear. But I often take heart from the frequently repeated words of Martin Luther King: “the arc of the moral universe is long, but it bends towards justice.”

The 21st Century, Multipolarity, and Education

The following email from Gaston Younger provides an interesting perspective on America's global reputation, the rise of other powers (especially in Asia) and the poor state of U.S. public education. As you will see from his emails, Younger lived in both Vietnam and France before coming to the U.S., where he served 20 years with the U.S. Army.
----------------

I just read you book "The end of the American century" and find it very fascinating but yet a gloomy, unpleasant realistic outcome for our country if our elected public officials do not take into consideration the serious situations (financial, economic & educational) facing the US.

I was born in French Indochina & I can attest to the facts on my vacation trip to Vietnam and the surrounding countries of the former French colonial empire that China has replaced both France & the US as the preeminent global power in that part of the world. We should all welcome the new era of multipolar world; however American citizens should definitely demand from their government on both local & federal levels to invest more financial resources in public education if we are to compete successfully with the new rising powers; S Korea, India, China, Brazil.

After the disastrous eight years of the Bush regime & a total lock on power by a fanatical, right wing Taliban GOP controlled US Congress from 1994 until 2006, our country image abroad has dramatically deteriorated. It is incumbent upon informed citizens to urge their elected public officials to take implement immediate actions in the areas of k12 public education & environmental friendly green energy if we are to pull our country out of this economic fiasco.

........................
After receiving this email, I responded to Gaston, asking him about his own background, and this is his reply:

I was born in Vietnam from a mixed French-Vietnamese ancestry, left Vietnam in '67 for France where I continued my studies & came to the States in '73. I graduated from high school in New Orleans & joined the US Army for the next 20 years as a linguist (French & Arabic). I was stationed mostly throughout the Middle East, did couple tours on the DMZ in Korea & one tour in Germany. I was selected by the Army to attend DLI(Defense Language Institute) where I graduated top 5% in my Arabic class.

I was fortunate to have a throughout French education in my childhood in Indochina. The French educational system is second to none in Western Europe. It emphasizes primarily on the rich tradition of French literature. All kids memorize at an early age "les fables de La Fontaine"by Jean de La Fontaine, the classical works by Victor Hugo, Moliere, Guy De Maupassant, Honore de Balzac, Emile Zola, Albert Camus, Anatole France, Gustave Flaubert.

Thinking about Vietnam in the 20th century, I am saddened by the critical mistakes made by the French government in 1945, when it refused to recognize Ho Chi Minh declaration of independence; however France recognized Laos independence four years after the end of WW2. Did you know Ho Chi Minh actually admired the US? It is unfortunate the cold war allowed many demagogues particularly US Senator Joe McCarthy and many more in the Truman & Eisenhower administrations to demonize Ho Chi Minh & portrayed him a a Soviet stooge or harboring pro-Chinese sentiment while Vietnam has deep mistrust of its northern neighbors for thousand years & lets not forget it was the same Ho Chi Minh who organized the guerrilla warfare against the imperial Japanese Army occupying French Indochina while working closely with the OSS.
Like many Vietnamese, I have a deep admiration for French culture, literature, cuisine, music.

I share many of your political ideas. I worked in 2004 for John Kerry but I was disheartened by the election results, I still could not understand the reasons 58 million Americans voted for a demagogue from the red state of Texas considering his shady personal character & many policies implemented by his administration will definitely affect our country for years to come. I wore the Army uniform for 20 years with pride, but the prisoner sexual abuse at Abu Graibh made me sick to my stomach & soiled our country image throughout the world, I will never forgive this rogue Bush regime for destroying our military, ruined our country image abroad.

The midterm election in 2006 & President Obama successful election in 2008 finally gave us some hope to turn this country around, although it may be a little bit too late. The damage (fiscal policy mismanagement, unilateral foreign policy) has been done.

Joseph Nye on American Power in the 21st Century

Harvard Professor Joseph Nye's work, especially his book Soft Power has much influenced my own thinking, and figures prominently in The End of the American Century. His ideas have directly or indirectly influenced the Obama administration, as reflected in Secretary Clinton's use of the term ''smart power.'' Both the rhetoric and actions of the Obama administration add substance to the concept.

Professor Nye's essay, "American Power in the 21st Century," is featured on the website of the China-U.S. Friendship Exchange, as a "comment" on my own "dialogue" there about The End of the American Century. This response to Nye's essay appears on that same site this month.

Professor Nye has long argued that power is multidimensional, that military power is increasingly irrelevant or dysfunctional, and that achieving foreign policy goals now rests on persuasion and cooperation as much as anything. I agree with him on all of this, and his marvelous formulation in this essay that ''on many transnational issues, empowering others can help to accomplish one's own goals.''

But I disagree with him that ''American power in the twenty-first century is not one of decline'' and the difference lies mostly in how we view America's domestic record. In Soft Power, Nye identifies many elements of American soft power, including its economy, culture, values, and global image. But as I show in my book, the U.S. has lost ground in virtually every domain of such soft power, while also losing strength and credibility with its military power and its global reputation. Meanwhile, other regions or powers, like China, the EU, India and others have gained global soft power influence, often at the expense of the U.S.

The U.S. economy and standard of living, since World War II a source of envy and admiration worldwide, is no longer much of a model or aspiration for others. Its astounding growth over the last two decades, it turns out, was a hollow shell, built on ballooning levels of household and government debt. The current economic downturn-still not finished by a long shot-is bringing the United States back to a more ''natural'' economic position, much lower than before. Even before the current crash, by many measures more meaningful than GDP/capita-like quality of life indices-the U.S. was nowhere near the top of the global list.

While growing the economy, based mostly on increased consumption, the U.S. neglected health care, education, investments, R&D, and infrastructure, and allowed increased levels of poverty and inequality. On all of those measures, the U.S. fares poorly in comparison to other developed countries.

Global opinion surveys conducted by Pew, BBC and others show little enthusiasm in other countries for ''American-style democracy,'' for American ways of doing business, or for the spread of U.S. ideas and customs. Though global opinion about the U.S. has improved somewhat with the election of President Obama, far more people worldwide continue to see U.S. influence on the world as ''mostly negative'' rather than ''mostly positive.'' On this scale, among 15 countries, the U.S. ranks 10th, below Germany, Britain, Japan and China, according to a recent BBC poll.

While American culture remains popular in many places (though not, by all means, all), it is difficult to see how global infatuation with ''Desperate Housewives'' can help solve problems like terrorism or global warming. As Professor Nye notes in his first paragraph, even some of our closest allies now believe the era of U.S. global leadership is over. Even more emphatic assertions of that belief have come from leaders in China, Brazil, Peru, Iran and elsewhere.

American decline is not necessarily a bad thing, though, given the increasing interconnectedness of countries and global issues. It will be easier for the United States to interact cooperatively with other countries-and for them to deal with Washington-if the U.S. is not so dominant and domineering. President Obama has adopted a much more conciliatory and modest approach to other countries-viz. his speeches in Ankara and Cairo-and this befits a country that has less reason to crow about its superiority and exceptionalism. As Professor Nye points out, most of the big issues facing the U.S., and the rest of the world, are not susceptible to the application of power by a single country. More things are ''outside the control of even the most powerful state.''

The United States is certainly in decline, both in absolute terms, and relative to other countries. But it will remain an important and influential power, especially if it continues to adopt a less arrogant, more cooperative approach to the rest of the world.

Dialogue and Forum on "The End of the American Century"

An extended "dialogue" on the themes of The End of the American Century has been posted on the website of the China-U.S. Friendship Exchange at this link. The interview with me was conducted by the organization's founder and president, Dr. Sheng-Wei Wang, who is based in Hong Kong. The interview focuses especially on America's changing global role and its relationship with China.

This November issue of the China-U.S. Friendship blog also includes two other essays on themes related to my book: "American Power in the 21st Century" by Harvard's Joseph Nye (author of Soft Power); and "Peace, Not War, the Best Strategy," by Professor of Geopolitics Madhav Das Nalapat at the Manipal Academy of Higher Education in India. Those two essays are accessible at this link.

My responses to those two essays will appear in the next (December) issue of China-U.S. Friendship.com.

New Global Powers Emerge From Crisis: Shanghai Daily Interview

I was interviewed in Shanghai by Joyce Pan for The Shanghai Daily, an English-language newspaper in China's largest city. Entitled "New Global Powers Emerge From Crisis," the interview focussed on the impact of America's economic crisis on China and other "rising powers." On the same page is an interview with French actress Isabelle Huppert, which should add to the number of hits that this blog gets!

Shanghai Daily Interview

Russia Hosts and Promotes Emerging Power Groups

This month, Russia hosted back-to-back meetings of two organizations representing “emerging powers” on the global scene. The first of the two, both held in Yekaterinburg, was a meeting of the heads of state of the Shanghai Cooperation Organization, which is made up of Russia, China and the four central Asian states (and former Soviet republics) of Kazakhstan, Uzbekistan, Tajikistan and Kyrgyzstan. In 2006, Iran, India, Pakistan and Mongolia were inducted as observer states and expected to become full members soon. The presidents of the four observer countries, including Mahmoud Ahmadinejad of Iran, were all in attendance at the Yekaterinburg meeting. (When the U.S. originally applied for observer status at the SCO, it was turned down).

As I mention in Chapter 9 (“America’s New Rivals”), the SCO is nominally an alliance of “good neighborliness and friendly cooperation” but many observers see it as a counterbalance to NATO and perhaps to the EU. In 2003, Chinese Premier Wen Jiabao proposed a long-term goal of turning the organization into a free trade area, reminiscent of the early phases of the EU.

The alliance already includes countries occupying three-fifths of the Eurasian landmass, and an expansion that would bring together China, Russia, India and Iran would be an imposing global force. Furthermore, it would bring together some of the world’s major oil reserves in Iran, Russia and the Caspian Sea. Some analysts see a strategic and economic effort among these countries to reduce the U.S. hold on the region’s energy resources. China and India, as the world’s fastest-growing energy consumers, may want to secure central Asia’s energy resources for their own economies. Iran and Russia, two of the world’s largest energy suppliers, want to reduce their dependence on sales to the West.

The idea of challenging Western (and especially U.S.) global dominance was evident in the communiqué from the meeting—The Yekaterinburg Declaration—which proclaimed that

“the tendency towards true multipolarity is irreversible. There is a growing significance of the regional aspect in settling global problems.”

Russia’s long-expressed opposition to “unilateralism” and “unipolarity” is a not-so-subtle swipe at the United States. Moscow’s preference for alternate configurations was evident in a second meeting in Yekaterinburg, right after the SCO assembly. This was the inaugural summit of the so-called “BRIC” countries—the emerging economic powers of Brazil, Russia, India and China. Russian president Dmitry Medvedev was perhaps guilty of hyperbole in calling the summit “the epicenter of world politics” but there is no doubt this is a formidable foursome. According to The Economist, the BRIC’s share of world output leapt from 16% in 2000 to 22% last year. For the last decade, GDP growth in the BRICs has outpaced that of the world, and of emerging and developing economies (see The Economist charts above). These four countries alone control about 40 percent of global currency reserves.

During the summit, the leaders talked about assuming more say in global policy-making; reforming the International Monetary Fund; and a plan to switch some of their foreign currency reserves out of dollars and into IMF bonds (an idea which is also the subject of much discussion in China). As the New York Times observed, the BRIC summit was

“intended to underscore the rising economic clout of these four major developing countries and their demand for a greater voice in the world. And Russia, the group’s host and ideological provocateur, is especially interested in using the summit to fire a shot across Washington’s bow.”

Why is "The End of the American Century" Important to China?

Professor Ni Lexiong, who was the lead translator for The End of the American Century, has written this note, in Chinese, on how he came to know about the book and why he thought it should be translated and published in Chinese. The financial crisis, he writes, makes it even more urgent that people in China read the book.

-------------------
《美国世纪的终结》译后记


--------------------------------------------------------------------------------

2009-4-20 12:55:34 倪乐雄 　 来源：易文网

2008年11月中旬，上海大学历史系徐有威教授告知，他的朋友、美国巴特勒大学政治系韩孝荣教授向他推荐了梅森教授最新出版的《美国世纪的终结》，我很快与梅森先生取得了联系，得知这本书刚出版几个星期，在美国已产生一定影响。书中一些观点虽然也在各种文章中能够见到，但如此全面、深入、系统地探讨美国的衰落，并且观点十分鲜明的专著却鲜有见到，梅森教授的著作可谓弥补了这一缺憾。
在这本书里，梅森教授从一个宏观的视野描绘了美国正在历史性地衰退的图景。其理论依据是保罗·肯尼迪关于“帝国过度扩张导致衰退”的观点，这种观点提供的历史模式是：一个帝国为扩张和维持自己的势力范围，必然会把国力消耗在巨大的军事投入上，从而使国家首先陷入经济衰退，继而不可避免地导致政治和军事上的衰退。肯尼迪认为任何历史上的大国都无法回避这一模式，包括美国。梅森教授所做的工作就是试图证明今天的美国已经进入“帝国衰退的历史模式”，他的研究思路是沿着“国防开支——赤字”和“债务——经济危机——社会全面危机和衰退”这样走下来的。
美国“次贷危机”迅速引发了世界经济大危机，对目前和未来将产生重大影响，在这种时刻将此书译成中文，介绍给国内读者很有必要。因为今天的中国和美国似乎都已不由自主地来到了历史转折点上，秉性刚直的梅森教授非常了解自己的国家，并有独到的细致观察和慎密分析。他判定美国的历史性衰退已经不可避免地来到了，而且就是现在，美国政府和人民必须做好调整心态和姿态的准备。这一预言家式的断言，无论将来能否验证，都值得我们关注。
此书的翻译得到上海辞书出版社上官消波副总编和吴雅仙女士的鼎力支持，在征得梅森教授意见和上海辞书出版社同意后，立即开始了本书的翻译工作。具体分工是：倪乐雄序言、中文版序、导言、第1章，孙运峰第2章、第3章，南琳第4章，陈道银第5章，赵雅丹第6章、第10章，熊曙光第7章，王立中第8章，周晓华第9章。孙运峰负责全书的统稿和部分校对，吴雅仙女士负责本书译稿的校订和编辑工作。
此书的出版也得到渥太华中国事务研究院(The China Research Institute of Ottawa)和姜留义女士的支持，在此表示感谢。

倪乐雄
2009年2月18日于上海寓中

The End of the American Century, Global Change and China

The following is a slightly edited version of my lecture in Shanghai on May 9 on "The End of the American Century, Global Change and China." The lecture was accompanied by a powerpoint presentation with much of the data and evidence I referred to, and the lecture was translated simultaneously into Chinese (see previous post on details of the forum).
----------------

Perhaps it is no accident that the first translation of The End of the American Century is into Chinese, since China is the most prominent “rising power” mentioned in a book that is primarily directed at the decline of the one power that has been dominant for the last half-century. The role of China is also important because of the huge and growing size of the Chinese economy, and the multifaceted interdependence of China and the United States. In my book, I see raw military power as increasingly irrelevant both for the United States and for other countries, as the biggest problems the world is facing—climate change, environmental deterioration, pandemic disease, poverty, terrorism, etc.—are simply not susceptible to military solutions. Addressing those problems requires international cooperation. Such cooperation also facilitates trade and economic growth, which are keys to reducing the poverty and inequality that provide the breeding ground for discontent and violence.

I understand that most of you are involved in business, trade or finance in various capacities, so I will focus my remarks today on economic issues, at least those in the United States. Given the scope and speed of the global financial collapse, economic issues are, indeed, on the minds of just about everyone. The U.S. economy is a core aspect of my treatment of the decline of the U.S. as a global power—but it is by no means the only one. And while I do, necessarily, devote a lot of attention to economics, I am myself a political scientist rather than economist. What I do in my book, and want to do here, is to look at the varied and interrelated dimensions of U.S. decline. Because it is the symbiosis of all these aspects of U.S. and global change that makes the current situation so distinctive, even unique. Many analysts in the U.S. see the current economic predicament of the country to be similar to those of other economic downturns in recent decades. I believe the combination of U.S. economic, social and political decay, and the simultaneous rise of other countries in the world—like China—means a much different outcome and future for the United States.

For those of you who have not yet read my book, let me provide a summary of the overall approach. Keep in mind that the English version of my book went to press in early 2008, well before the ongoing economic collapse of the United States, and appeared in English in the fall, just as the scale of the catastrophe was unfolding. The essential argument of my book is that the U.S. has come to the end of its long period of economic affluence and global dominance. Most Americans—even, at last, the experts!—are starting to see the handwriting on the wall now, as we see collapsing around us the stock market, housing markets, job markets, banks, manufacturing, retail stores and news media. These are all interrelated, and driven by longer term problems that pressed against us before President Obama, and even before the disastrous administration of George W. Bush. The 20th Century, often called “The American Century” had already come to a close before the awful terrorist attacks of September 11.

America’s decline is a result of three convergent and interrelated phenomena: the deterioration of the U.S. itself—especially in the economic realm but in many other respects as well; the increasing influence of other global powers; and the changed nature of global interactions. The decade-long convergence of all three of these phenomena marks a global shift of historic proportions, and one that defines a much different place in the world for the United States and its citizens.

The central aspects of U.S. decline is economic. The federal government, the state governments, and most households have been living beyond their means for a generation, and the result is unprecedented levels of government, household, mortgage and consumer debt. Americans citizens spend and consume more than they earn, and the United States as a whole consumes more than it produces. This has posed a burden on the rest of the world that is unsustainable in the long run. I will come back to these economic issues in a few minutes.

The U.S. has also fallen behind other countries in many other areas where we flourished during The American Century. The educational system, once considered the world’s best, now ranks near the bottom among developed countries. Health care shows the worst results, on average, of any of the countries of the Organization for Economic Cooperation and Development (OECD). The U.S. has higher poverty rates, more violence, and greater inequality than almost any other OECD country. Our roads, highways, bridges and dams—most built near the beginning of the American Century—are decrepit and in need of major investments. Even the country’s vaunted political system, tarnished by private interests, money and low levels of political participation, is no longer a model for emulation much of anywhere in the world.
While the U.S. has been on a long slide, both with our domestic health and our international reputation, other countries and regions have been moving ahead, and gaining confidence and clout. China is now the world’s workshop, and has the fastest sustained economic growth of any country in history. The European Union has brought together 27 countries into a peaceful and healthy community—an economic bloc bigger than the U.S. and with many countries more successful than the U.S. in providing health care, education and welfare to their citizens. Many other countries are increasingly prosperous, confident and assertive, to the point of challenging U.S. dominance in their own parts of the globe.

In addition, globalization has changed the rules of the game. Labor and capital move more easily around the world, making it more difficult for the U.S.—or any government—to control economic development. Organizations that span national borders—international and non-governmental organizations, multinational corporations, terrorist groups--are for good or ill challenging the power and influence of countries. All of this make global politics more complex, and less subject to the influence of single nation-states, especially go-it-alone ones as the U.S. has been for the last eight years.

President Obama is making noble efforts to bolster America’s global reputation and reverse its decline, but in my view, it is too little and too late. The rest of the world has already caught up or caught on, and is not much interested in the U.S. resuming its global leadership. Furthermore, what the world needs now, in confronting problems--of global warming, pollution, nuclear proliferation, terrorism, poverty and epidemic disease—is cooperation and compromise rather than “leadership.”

In my book, I buttress all of these assertions by using data, showing both trend data over time in the U.S., and data comparing the U.S. to other wealthy countries. In both kinds of comparisons the US does not fare very well. Let’s look at some of these figures, focusing on the economic ones.

The End of the American Century can be seen as a descendant of the 1985 book by the Yale historian Paul Kennedy, The Rise and Fall of the Great Powers. Kennedy studied the big empires of the past—Rome, Britain, Spain, among others—and concluded that each of them foundered on what he called “imperial overstretch.” This is the tendency for big powers to become so “stretched” by foreign ventures, expansion or wars that they end up bankrupting themselves at home, leading to social and economic decay. Kennedy predicted in the mid-1980s that the same thing would happen to the Soviet Union, and even hinted that the U.S. was also vulnerable to the problem of imperial overstretch and debt. When he published that book in 1985, the U.S. federal debt was about 45% of the economy (GDP), which Kennedy said was historically unprecedented for any large power in peacetime. The only exception was France on the eve of the French Revolution.

But look what happened in the two decades after the publication of Kennedy’s book. The US federal debt mushroomed from less than half of GDP to over two-thirds of GDP. The problem escalated with the administration of G.W. Bush, who sharply increased defense spending for the wars in Iraq and Afghanistan, while simultaneously cutting income taxes. When I wrote my book in 2007-2008, I thought the size of the debt was alarming, as it approached $10 trillion. But then the financial crisis hit the United States, the stock market collapsed (by half), unemployment skyrocketed, and Congress and the President approved huge financial bailout plans that sent the federal debt even higher. The federal budget of the new Obama administration, calling for huge new spending on education, health care, infrastructure and the environment (all vitally needed but terribly expensive), is sending the federal debt burdens to levels unseen since World War II. Within a few years, even according to the President’s optimistic assumptions, the gross federal debt will reach 100% of the size of the economy. I should point out that these huge debt levels do not even include the “unfunded liabilities” for Social Security and Medicare, which would add another $45 trillion. The government has put aside no money to pay for retirement and health care benefits for senior citizens, who will increase greatly in numbers as the “baby boomers” begins retiring in the next few years.

The federal government debt, though, is only one aspect of the multiple levels of indebtedness in the United States. Another aspect of this is the trade deficit. For most of the years since World War II, the U.S. maintained a rough balance of exports and imports. But during the 1990s, as imports soared and exports declined, the trade balance got seriously out of whack, reaching records levels in both absolute terms and as a percent of GDP. The huge increase in imports, many of them from China, helped the U.S. standard of living, but was not matched by similar productivity, output or exports from the US.

A third aspect of US debt—what some called the “triple deficit”—is household and consumer debt. Over the last two decades, Americans have built up record levels of consumer debt. The household savings rate (savings as a percent of household income) have always been relatively low in the US compared to other countries, but in the last twenty years have declined sharply. By 2005, this number had dipped below zero for the first time since the Great Depression. Most Americans have saved almost nothing for their retirement years, at a time when most employers are no longer providing retirement pensions for their employees. This presages a sharp decline in the standard of living, and dramatic increases in poverty, as the population ages. On this dimension too, the US compares unfavorably with most other wealthy countries.

The American propensity to spend rather than save is partly a culture phenomenon—the strong strain of materialism in U.S. culture—but also partly due to the increasing influence of the financial services sector in the U.S. in recent years. Manufacturing has declined steadily as a share of GDP in the U.S. The U.S. doesn’t actually produce much any more. Increasingly, manufacturing has been replaced by financial services. Banks and mortgage companies make money by getting people to borrow, and therefore go into debt. One small but telling example of this is the dozens of credit card offers that most Americans get in the mail. I get several such offers a week, for example. But so do many of my students, most of whom have no income at all! As a consequence, credit card debt is at a record high, and the average household has about $10,000 in credit card debt. Consumer and household debt overall totals about $13 trillion—the size of the entire U.S. economy.

The bottom line is that the U.S. has become a consumer society, consuming far more than we produce or earn, and this can not be sustained. Consumption accounts for almost three-quarters of GDP in the US—a record for any large economy in modern history. As we have seen, much of that consumption is fueled by debt. Americans will have to save more and spend less. This will entail a substantial contraction in the U.S. economy, as workers are laid off and consumer spending declines. Unfortunately, this will also mean a decline in tax revenues, just at the time when government spending is increasing. The U.S. stock market has already declined by 50% since its highs of 2008. The economy as a whole is shrinking, at the fastest rate since the Great Depression. Most economists think that this economic decline will bottom out fairly soon, and that the worst is over. But given the problems I have mentioned, I think it is possible that the US GDP could contract by as much as one-third—roughly the same decline that the U.S. experienced during the height of the Great Depression in 1929-1933. It took the U.S. economy about 4 years to recover from that decline.

U.S. economic decline is just one element—albeit an important one—of the diminishing U.S. power, influence and reputation in the world. Global surveys show little enthusiasm around the world now for “American-style” democracy, for the American way of doing business, or for the spread of US customs and ideas. People in most countries think it would be better if another country rivaled the U.S. in military power. And a recent BBC poll of people in 21 countries found many more believing that the U.S. role in the world was “mostly negative” rather than “mostly positive.” China ranked slightly ahead of the U.S. on this question.

At the same time that U.S. power and influence is diminishing, some other countries are growing stronger, more confident and more assertive. Possible rivals for influence with the U.S. include the “BRIC” countries—Brazil, Russia, India and China—and also the European Union, which now includes 27 countries with a population and GNP larger than that of the United States. The “rising” BRIC countries have had very fast rates of economic growth in recent years and, at least until the economic crisis this year, were expected to perform even better in the near future. By another measure, the growth in stock market value, these rising powers are also outpacing the U.S. The U.S. stock market grew exceptionally fast from 2002-2007, rising at an average rate of about 15% per year. But each of the BRIC countries experienced stock market growth at least twice that of the U.S. in those years. As a percent of the world’s total stock market, the U.S. share has shrunk by almost half over the last thirty years.

Perhaps even more astonishing is the declining relative influence of U.S. banks, a phenomenon accelerated, of course, by the collapse of so many financial institutions in the U.S. Measured by market capitalization, a year ago four of the largest banks in the world were American. Now only two are. And four of the top ten are now Chinese!

These changes in the U.S. and the rest of the world signal a fundamental transformation of global politics and economics, and will require adjustments by people and governments alike around the world. For the United States and its citizens, these changes will be particularly wrenching. The U.S. economy will decline—probably by a lot, as will the standard of living in the U.S. For Americans used to a rising tide of affluence and spending, this will be a difficult adjustment. And it will also be difficult for Americans, psychologically, to deal with our diminished stature in the globe. Many changes are necessary to help restore America’s economic, social and political health. It seems to me that President Obama is cognizant of these needs, and is moving amazingly rapidly to address them. But the task is a difficult one, and a long-term one.

I am not really in a position to suggest what will happen, or should happen, in China. That is for you to decide, not me! But I was told me you would be interested in how I see all of this affecting China, so let me just mention a few things. First, of all, as should be obvious from my presentation, it seems to me that China is going to have to rely less on the U.S. market for helping fuel China’s economic growth. Americans will simply have to spend less, which means buying less of China’s many exports. It would seem that this would require, and offer the opportunity, for Chinese manufacturers to focus more on the domestic Chinese market, which will inevitably improve the standard of living of people in China. (This is an argument also made by Paul Krugman during his recent visit to China).

Even so, the U.S. and China both need each other for the economic health and development of both countries. And the rest of the world needs these two big powers to cooperate in solving global issues of trade, the environment, poverty, terrorism, nuclear proliferation, etc. So the interdependence of the two countries should continue and increase. China’s growing economy and international influence comes with increasing global responsibilities along these lines as well. China, for example, has now surpassed the United States as the leading emitter of carbon gasses that contribute to global warming. In my mind, global warming is the single greatest threat to the globe, and it requires serious work and attention. The problem can not be solved without the participation and cooperation of the U.S. and China.

Due to what has happened in the U.S., in China, and in the global community, China should by now certainly be considered an equal partner with the U.S. and other big powers in helping to shape this new global environment. I believe, from what your leaders say, that China is ready to play a bigger role in the world. And with a new, enlightened leadership in Washington, I am hoping the feelings will be mutual.

"The End of the American Century" Sparks Interest in China

A Chinese translation of The End of the American Century was published in China in April, just five months after the book appeared in the United States (see earlier post on publication details). The editors at Shanghai Lexicographical Publishing House told me that they translated and produced the book in record time, because they considered it a "hot topic." At the National Book Fair in Jinan, according to the publisher, the book attracted a good deal of interest, and reached #3 on the publisher's sales ranking.

A conference related to the book's title was held at the Shanghai Exhibition Center on May 9, and I was invited to give the opening address, along with a number of prominent Chinese academics. The event was held in the Center's "Friendship Hall" (see photo) which seated over 1000 people. But the turnout was unexpectedly large, and a separate room, with sound piped in, was set up for the spillover. The organizers estimated the total audience at over 1300. While some of the audience were students and professors, most were businesspeople, investors and clients of a financial securities company that was one of the sponsors of the event. So they were especially interested in the U.S. and global financial crisis, and how that will affect the U.S., China, and Sino-U.S. relations.

From questions posed by the audience, and in conversations I had with academics, journalists and financiers, the reactions to my thesis of U.S. decline was decidedly mixed, and surprisingly similar to the range of responses here in the U.S. Some agreed that the U.S. was in serious straits. Others felt that the U.S. would remain (or even should remain) the world's dominant power. Some felt that it was China's turn to take a more prominent role in global politics and economics.

Shanghai itself provides a stunning example of how far and fast China has grown. I last visited the city 20 years ago, when most of the street traffic was bicycles, and before any of the magnificent skyscrapers had risen on the other side of the river from the Bund. Now the city center is as gleaming and modern as any I have seen anywhere in the world. The many downtown shopping malls, modern and airy, are filled with outlets of the most popular (and most expensive!) Western chains. The city's two airports are modern, efficient architectural beauties. The subways and trains are clean, comfortable and efficient. The world's first commercially operating "Maglev" train (magnetic levitation) connects Pudong airport to the city center, reaching a mind-blowing speed of 250 mph. The only real problem in the city, to my mind, is the street traffic, with the chaotic and dangerous competition of taxis, cars, motorbikes, bicycles and pedestrians (more on this in a later post).

In later posts, I will post more information on the Shanghai conference, with the text of my own lecture there, and information about the other presenters at the meeting.

Shanghai Conference on "The End of the American Century"

A one-day conference on The End of the American Century and related themes will be held in Shanghai on May 9, in connection with the publication of the Chinese version of my book by the Shanghai Lexicographical Publishing House. I will make a presentation on the theme of my book.

Other presenters include Professor Ni Lexiong, the principal translator of The End of the American Century; Professor Tang Xiaosong of Guangdong University; and Mr. Ma Guoshou, the Director of the Allwin Economic Institute in Hong Kong.

Topics of presentation include: Is this The End of the American century?; U.S. national strategy and Sino-U.S. relations; the U.S. dollar, global monetary issues and China's future wealth; and sea power and the pattern of global interactions.

The seminar will be held at the Shanghai Friendship Hall, 1333 West Nanjing Road, on Saturday, May 9, from 12:30 to 5:00 p.m.

(Look for a future post with a link to the Chinese site about this event).

Obama in Ankara: Re-setting US Relations with the Muslim World

President Obama has taken deliberate and high-profile initiatives to mend U.S. relations with the Arab and Muslim world. In the first months of his presidency, he welcomed Jordan’s King Abdullah II to Washington, where he endorsed the “two-state” solution to the Israel-Palestine issue—a proposal long favored by the Arab states. He met with Saudi King Abdullah in London during the G20 Summit, causing a media stir when he bowed to the king, as is customary and respectful with royalty.

Most importantly, he delivered a major address in April to the parliament in Turkey, declaring that “the United States is not, and will never be, at war with Islam.” But he went even further, recognizing the richness and influence of Islam, and promising that the U.S. would listen, even when it did not agree:

“I also want to be clear that America's relationship with the Muslim community, the Muslim world, cannot, and will not, just be based upon opposition to terrorism. We seek broader engagement based on mutual interest and mutual respect. We will listen carefully, we will bridge misunderstandings, and we will seek common ground. We will be respectful, even when we do not agree. We will convey our deep appreciation for the Islamic faith, which has done so much over the centuries to shape the world -- including in my own country. The United States has been enriched by Muslim Americans. Many other Americans have Muslims in their families or have lived in a Muslim-majority country -- I know, because I am one of them.”

This is an extraordinary and important passage, in numerous ways, and encapsulates much of the new orientation and policies of the Obama administration, and not just toward the Arab world. First of all, it is diminishing the centrality in U.S. policy of the war on terrorism—which has so distorted American policies, priorities and values.

Secondly, the speech emphasizes “broader engagement” with the Muslim world, which is both necessary and inevitable, given the size—over one billion—and growing influence of the global Muslim population. The President’s approach to Islam is not just tolerant, but respectful and appreciative of the faith, which has done so much to “shape the world” and which, Obama could have added, has much in common with both Christianity and Judaism.

The President emphasized his intent to listen to others, even when there is disagreement. This fits in with his frequent references to the importance of a great power to recognize past errors, to temper hubris, and to approach other peoples with humility. Such a change from the previous administration could hardly be more dramatic, and has been noted around the world. The Egyptian Foreign Minister said that “Obama’s speech is the first and significant step for easing the tension between the Muslim world and the United States.”

Finally, the President’s personal touch at the end of that passage sent an important signal, both to the global community and to his own citizens, that we are all part of one human community. It was a risky political statement, for it would antagonize and alienate some Americans. But it was also a courageous one—identifying himself with what some consider to be the enemy—and calling on his compatriots for tolerance and understanding.

China Now Has Top 3 Banks in World

China now has the three largest banks in the world, measured by market capitalization. This is a stunning change, and yet another indicator of China's rapid emergence as a global economic power. According to a New York Times article, three years ago, China did not have a single bank among the world's top 20. Now it has the top three and four of the top ten.

The United States, due in part to the banking and financial crisis, has dropped considerably in global banking. In 2006, the U.S. had 7 of the top 20 banks, including the top 2. Now it has just 3 of the top 20 and the largest, Morgan Stanley, is rated fifth.

If banking is so crucial to market economies--as Americans are constantly being reminded that it is--then the decline of US banks, in combination with the rise of Chinese ones, provides another example of the relative decline of the United States.

Furthermore, it seems that the Chinese economy, and its banking system, is in position to weather the storm of the global financial and economic meltdown. Most of the big banks in the West lost 20% or more of market value in the first two months of 2009. In China, the top two banks lost only 3% and 8% in value, respectively and the third largest, the Bank of China, actually increased by 5%.

As the New York Times notes, while most of the world is in financial collapse, "China's economy has suddenly become too big--and too healthy, expected to grow by at least 6.3 percent this year--for the rest of the world to ignore."

Kenneth Lieberthal, a Brookings Institution scholar who oversaw White House Asia policy from 1998 to 2000, sees China as one of the first countries to emerge from the current crisis and one of the very few countries that will emerge from it "without having high levels of government debt."

The Middle Kingdom Reasserts Itself

China has also suffered from America's economic meltdown, but the country's leaders continue to assert themselves on the global stage, both economically and politically. Some Chinese even see the problems in the U.S. as an opportunity for China to fill the void being left by the U.S.

The latest example of China's new confidence is a remarkable story buried on page A5 of this Tuesday's New York Times--"China Urges New Reserve to Replace the Dollar."

"In another indication that China is growing increasingly concerned about holding huge dollar reserves, the head of its central bank has called for the eventual creation of a new international currency reserve to replace the dollar."

The official argued that a new currency reserve system controlled by the International Monetary Fund would be "more stable and economically viable."

As the Times observes, "the proposal suggests that China is preparing to assume a more influential role in the world."

This is a theme I develop in The End of the American Century, where I describe China's opposition to "hegemonic" and "unipolar" power politics--code words for U.S. domination--and the country's growing efforts to promote its "soft power" influence in Asia, Africa, and elsewhere. The "peaceful rise" of China is supported by the population as well: in a 2003 poll in the country, 40 percent picked China as "the most prominent country in the world."

As London's Economist observes in its cover story on "How China Sees the World," "there is a sense in Beijing that the reassertion of the Middle Kingdom's global ascendancy is at hand." Prime Minister Wen "no longer sticks to the script that china is a humble player in world affairs" and now talks of China as "a great power."

The main reason for the proposal for a new international currency is China's growing concern about the safety and stability of its own vast holdings of the U.S. currency. China holds an estimated $1 trillion in U.S. government debt, the world's largest holdings. Earlier this month, the Chinese prime minister, Wen Jiabao, publicly expressed concern about the "safety" of these investments and asked the Obama administration for assurances that these securities would maintain their value.
(See the New York Times story "China's Premier Seeks Guarantee from U.S. on Debt").
Last January, Mr. Wen criticized the "unsustainable model of development characterized by prolonged low savings and high consumption." There was no question about which country he was referring to.

When Premier Wen hosted Secretary of State Hillary Clinton in Beijing in February, it was clear that this was a meeting of equal, sovereign states. Next month, at the meeting of the "G20" economic powers in London, the most important business will be that between Presidents Barack Obama and Hu Jintao. The Middle Kingdom is back.