The current correlation of forces in the struggle for global economic hegemony

Please cite the paper as:
Juan Vázquez Rojo, (2020), The current correlation of forces in the struggle for global economic hegemony, World Economics Association (WEA) Conferences, No. 1 2020, Trade Wars after Coronavirus, Economic, political and theoretical implications

Abstract

The objective of this paper is to analyze the current correlation of forces between China and the United States to verify whether this distribution of power corresponds to the current hegemonic order. Starting from the concept of interstate hegemony and hegemonic order, a comparative analysis is made between both countries in five areas: productive, technological, commercial, financial and military. This analysis allows for a structural explanation of the causes of trade and technological war, as well as shedding light on the extent to which China may be a candidate to replace the United States as world economic hegemon. Among the main results, it is considered that the current hegemonic order is not representative of the current correlation of forces between both powers. However, China is still far from overtaking the United States.This fact causes an erosion in the world system and leads to a growing increase in inter-state tensions.

3 comment

  • Oscar Ugarteche says:

    Comment on Vasquez
    Susan Strange’s 1971 article “Sterling and British Policy: A Political View” is useful for the definition of top currency and its role. Strange’s whole point is that the hegemonic power can call the rules of the game in international currencies. In this way, it can export its crisis and have someone else carry the weight. Until it cannot and the new top currency emerges.
    Secondly, the question of a multipolar world does not imply some hegemonic power or other but a sharing of leadership as stated by Hiro (2012) in After Empire: The Birth of a Multipolar World. The classic Keohane and Nye (1977) Power and Interdependence is a useful introduction to this. How multipolar the world becomes depends on the weights of the poles. The graph below shows the shift over time. The change would suggest that it is an East-West issue, where the US leads the West, and China the East rather than a US-China issue. A Binational comparison is not completely useful in this context. It is not WWII and the fall of the British Empire but the East’s resurgence after several centuries. It is the West’s downturn, not only of the US, and the upturn of the East, and not only of China. The RCEP agreement signed on 15.11.2020 is witness to this, with 30% of World trade and 30% of the world population. The largest trade agreement in history, and it does not include India yet.

    The argument that the dynamic of the institutions, relations, and rules can avoid the separate states’ trend to try to impose their particular interest without regard for system-level does not consider Ruggie’s work on liberal multilateralism. What occurs is a loss of that concept due to the loss of leadership in the technological competition. The various trips to 53 countries by State Department personnel worldwide to counter the use of Huawei 5G are examples of a loss of leadership and the incapacity of losing the technological competition. The example below speaks for itself. The logic expressed that if the US cannot create a 5G network on time and with competitive pricing, it must sabotage the one who has. In that view, China must not lead the way at any cost. The narrative is that buying Chinese is choosing autocracy over democracy. The next time it will be an “autocratic” electric car versus a “democratic” gasoline one and the next an “autocratic” Covid vaccine versus a “democratic” one. The problem with the narrative is that it does not solve the technological and cost problems.

    The reference to “Clean Network” refers to “China Clean Network”. Said the US under-secretary-for-economic-growth-energy-and-the-environment on November 24, 2020:

    “So the trip headline is the Clean Network has grown to 53 clean countries with the entry of Brazil, Ecuador, and the Dominican Republic just in the last week. The momentum towards trusted 5G now is undeniable. After my September Taiwan trip, which culminated last week in the signing of an Economic Prosperity Partnership with Taiwan, my team and I, traveled to 25 countries in Europe, the Caribbean, Middle East, Central and South America out of the Clean Network.
    Moreover, the Clean Network story is one that needs to be told. Here is just a real quick summary. Six months ago, when our team got the 5G authorities, it looked like it was too late to prevent the Chinese Communist Party’s Huawei from being deeply embedded in the next generation of global telecommunications. At the 2020 Munich Security Conference in February, Speaker Pelosi warned European countries they would choose autocracy over democracy if they let Huawei take part in rolling out 5G technologies.” (Under Secretary for Economic Growth, Energy, and the Environment Keith Krach and Assistant Secretary for Energy Resources Francis R. Fannon Briefing on Recent Travel to Central and South America. November 24, 2020. Seen on https://translations.state.gov/2020/11/24/under-secretary-for-economic-growth-energy-and-the-environment-keith-krach-and-assistant-secretary-for-energy-resources-francis-r-fannon-briefing-on-recent-travel-to-central-and-south-america/)

    If the US and Europe developed a reasonably priced 5G on time, this would not have happened. Quality and price would have been the choice. However, that competition does not exist any longer. In the end, that is the only problem. The centre of the political debate on the trade war is technological competition and the bad example China sets for the rest of the world with free trade and economic planning; State intervention with high-level public education, and preferring multilateralism over unilateralism.
    The opposite example of the past four years of market-led protectionism is not good. State intervention, mostly to rescue the financial sector, is not a good idea either. Market-led private high-level education with massive student debt is unviable in times of long-lasting recession. Finally, unilateralism is only possible for the two largest economies. So the US has an issue with the Chinese economic example because it has little to show for itself and worse after the last four delirious years and its long-term decline.
    The Arrighi cycle of hegemonic decline looks upon the downfall of the Netherlands, France, and Great Britain while obviating the Spanish Empire. None of them resemble the US weakness and slow decline while an upcoming multipolar world has no clear political leadership, different from the past. In Spanish the saying is, “el muerto goza de buena salud.” China is leading multilateralism and the RCEP, Britain has departed the EU and left Germany as the EU leader, and the US is holding on to itself, and its neighbours, for dear life. The US is far from its end as a world leader, in spite of the efforts made by Mr. Trump in that direction. The world system path is unclear, but it will go with all major actors trying to lead the way, pushing each other aside.

  • Eduardo Mtz-Ávila says:

    Dear Juan

    I was very pleased to read your article. Without a doubt, it is a very complete text. As you told me in my writing (which I appreciate you took the time to read), we share Giovanni Arrighi’s theoretical approach to explain the context of hegemonic dispute. The relevance of establishing the discussion from a historical-structural approach is a common point.

    I don’t know if you share the idea, but Arrighi’s work is so broad that I consider that the question of hegemony can be discussed from different angles. I think the category of interstate hegemony developed by Arrighi and Silver has more to do with Wallerstein’s approach to the world-system. Within a given system, what prevails is the struggle between nation states for international leadership. Hence the emergence of the hegemonic order. However, in the long 20th century, Arrighi points out that hegemony is not limited to adopting the leadership of the system, but that the intrinsic dynamics of change in the hegemon generates a transformation of it. Authors such as Lorenzo Fusaro point out that this perspective has a greater relationship with Braudel’s vision of the world economy since it implies a qualitative change in the systemic conformation. Despite the difference in interpretations, where there is full agreement is in pointing out the preponderance of the financial sector as the process of hegemonic decline.

    With respect to the five areas of hegemony explored in your article, I fully agree with your position. Despite the fact that the hegemony of the United States is weakened by what has been theoretically sustained since Arrighi, I agree that the power of the United States is still in place, although it has been violated. The statistics and the detailed information you provide give an account of this. When I use the concept of hegemonic siege, I seek to discuss the areas where China disputes power with the United States. Your comments are very useful to me because they force me to nuance the idea. I agree that China has not overtaken the United States in the areas I have pointed out, but is confronting its hegemonic power.

    On the other hand, one of the issues that call my attention is the discussion you propose about decoupling. The trade war, the questioning of multilateralism, as well as the push for de-globalization, represent an attempt to revive the productivity of U.S. industry through protectionist policies. Based on this idea, two questions. 1) In the context of the economic and geopolitical dispute between the United States and China, do you think there is a mechanism that could derail China from the process of hegemonic dispute similar to what happened with Japan in the 1980s with the Plaza and Louvre agreements? Does the trade war and the breakdown of globalization pay off in that process? 2) Does the hypothesis of productive and commercial decoupling have the same impact on so-called financialization? Is it feasible to think about a regionalization of the international financial system?

    I hope we can continue to communicate. If you have more written material, I would like to read it.

    Thank you very much.

    Greetings,

    Eduardo Mtz-Ávila
    PhD student at the Institute of Economic Research, Universidad Nacional Autónoma de México

  • Juan Vázquez Rojo says:

    Hello Eduardo:

    Thank you very much for your comments.

    I really apreciate your thoughts about this issue. The questions you ask are really interesting and complex. I will try to answer them.

    In relation to the dispute between the United States and Japan, I think it is important to take into account the historical role of the Asian power. In this sense, since the Second World War, Japan has been a key ally in the US hegemonic project, being totally subordinated at the military level. This premise is fundamental when comparing it to the Chinese case.

    In this way, I believe that the United States has less strength than at that time and that China would not let itself be so easily bent (it has fewer incentives and pressures than Japan to do so). However, I think that a big problem for China is its system of alliances, since they have many enemies in their area (Japan, South Korea, India, etc). This is a fundamental geostrategic problem for regional hegemony. Thus, the pressures that the United States can make in alliance with China’s enemies can be very strong.

    Now, I believe that China is already preparing for such a threat. Clear examples are the new calls for “Dual Circulation” and the need to seek productive independence in areas such as semiconductors, as well as the reinforcement of the military.

    However, I believe that the situation is very different than in the case of Japan. What the United States is likely to achieve is to slow down China’s technological development (temporarily). In part, it has already achieved this by delaying the launch of 5G in the Asian country.

    On the issue of financialization, decoupling is more complicated. In general, I believe that at present the strongest power the United States has is precisely financial and monetary hegemony. The dollar continues to be a gigantic power tool, something that has been clearly demonstrated in the COVID-19 crisis.

    For the moment, China is very dependent on the dollar and is far from achieving a similar role for the Yuan in the international system, since the Chinese model itself is incompatible with such a thing. An example of this is China’s need to have large reserves of Treasury Bonds and dollars in order to function in the international arena. This is far from changing and, therefore, it is difficult to think of a decoupling in the financial line. As long as the dollar remains so strong, there is nothing China can do.

    I try to send you an email to continue this debate in the future.

    Thanks a lot.

    Juan Vázquez Rojo

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