Economic foundations of the coming US-China conflict

This is an interesting piece of news I wasn't aware of, which strengthens my argument against the idea that Sino-US trade links will prevent a new superpower conflict (from The Wall Street Journal Asia, 2008 July 31):

[In March 2007] the Bush administration reversed a two-decade-old policy that prevented U.S. companies from seeking protection against unfair government subsidies of goods produced in "nonmarket" - usually communist - economies. For years, the limit effectively shielded China from such complaints.

. . . the number of complaints filed under U.S. law has soared. In 2006, American companies filed five complaints similar to those pursued by [steel tube manufacturer] Wheatland, alleging unfair pricing, government subsidies - or both. In 2007, complaints jumped to 20. So far this year, 13 such cases have been filed.

Since the Carter administration, US presidents have consistently ignored 中国/China's "trade-distorting" advantages, like government subsidies, cheap repressed labor, or a fixed undervalued currency. That's because every president has sided with multinational businesses, which not only had a long-term vision of gaining access to the enormous China market but themselves benefited from China's trade advantages as they shifted production from unionized American factories to Chinese sweatshops in low-tax free trade zones.

The Cheney administration has by no means reversed this policy, but its increasing openness to the protectionist demands of smaller domestic capitalists and more aggressive approach to trade disputes (seen in the first WTO ruling against China a couple weeks ago) are revealing. And the room for trade conflicts is only going to grow. The seven-year-old Doha round of trade liberalization talks collapsed on Tuesday as China, for the first time, made a high-profile rejection of the American "free" trade agenda. As China continues to climb the value chain, it will start to threaten an increasing number of American businesses at the same time that Chinese businesses, with quiet support from their government, squeeze American companies out of the China market.

Meanwhile, perhaps the most explosive economic dispute - access to resources - continues to develop underneath the surface. China has been extremely aggressive over the last five years in securing long-term rights to raw materials across the globe (these articles cover China's activities in Africa, but it has been active from Myanmar and Indonesia to Brasil and Argentina as well). This poses no immediate threat to the United States, but in the long run Chinese and American capitalists might find themselves running up against each other in the search for production inputs, impelling their two governments to fight for control over conflicting neocolonial claims. And of course the issue of control over oil supplies will loom increasingly large unless some breakthru is made in energy technology or oil extraction.

The best way to conceptualize the emerging conflict may be to interpret China and the USA's diverging interests as an unavoidable contradiction within capitalism itself. To survive, capital must constantly expand; failure to do so leads to crisis, as even mainstream economists will admit. For the last thirty years, this expansionary process has proceeded with remarkably little resistance as obstacles like revolutionary movements and organized labor were brutally destroyed and vast new markets (China chief among them) were opened to the movement of capital. But this expansionary phase may be coming to an end as profitable new opportunities diminish and raw materials become more scarce.

If capital requires the ability to range freely across the globe in search of new opportunities, it must also remain rooted geopolitically to a certain extent. It cannot thrive without the regulatory environment provided by the state, and when it runs into insuperable obstacles it turns to the state to clear the way. Thus distinct groups of nationally based capitalists emerge, and can coexist in harmony as long as raw materials and exploitable labor are abundant. But when those essential inputs become scarce, businesses may demand their state take action to protect their supplies. Unfortunately, as we saw in the Great Depression, erecting autarkic economic blocs may secure the conditions of accumulation in the very short term, but it simply aggravates the situation in the long term by restricting capital's freedom of movement and further constraining its options for profitable deployment. The crisis of the 1930s was ended only by the massive destruction of World War II, which eliminated all of the rivals to American capital and provided fabulous new investment opportunities in the guise of reconstruction contracts.

World war is certainly not the only way to resolve these contradictions - the last major crisis in the global economic system, the stagflation of the 1970s, unfolded very differently. And economic tensions between the USA and China are only now beginning to emerge, so it will be some time before open conflict can develop. But don't discount the possibility too quickly. Those of us 30 years and younger have never experienced global capitalism in crisis or major challenges to American hegemony, so it might be easy to imagine that "globalization" or "interdependence" or some other slogan has superseded the kinds of global conflict that defined the years 1914 to 1989. But it's worth remembering that capitalism today is more similar to the capitalism that preceded the Great Depression than any other time since.