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Separate Events Are Accelerating A Shift That Is Transforming Global Politics

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EDITOR'S NOTE: The world was not supposed to turn out that way,” the author writes near the top of his article for The Atlantic. “And why not,” we ask. As he writes, we witness the disillusionment of globalization unfold. There’s a natural schism that comes into play when it comes to the relationship between distinct regions and societies. It’s called “localism,” and it's as old as human civilization. Alliances are, as anyone would expect, typically formed between countries whose shared vision of the world may be compelling enough to iron out “local” differences between them. As the author is right to point out, these dynamics of differences and commonalities have intensified, transforming global politics, and drawing an adversarial line between East and West. We’re seeing two very distinct yet incompatible worlds; the East, envisioning a “new world order,” and the West, looking to preserve the status quo. What does this say about the global economy? Reeling from its globalization hangover, it’s seeing a hostile split between two exclusionary economic and monetary systems, forcing nations to take sides.

Separate events are accelerating a shift that is transforming global politics.

The russian invasion of Ukraine and a series of COVID-related shutdowns in China do not, on the surface, appear to have much in common. Yet both are accelerating a shift that is taking the world in a dangerous direction, splitting it into two spheres, one centered on Washington, D.C., the other on Beijing.

The world was not supposed to turn out that way. With the disintegration of the Soviet Union three decades ago, globalization seemed to be knitting all types of countries and societies into one prosperous order, bound together by trade, the internet, and, to a greater and greater degree, shared political and economic ideals. China’s capitalist revolution raised hopes that even that Communist giant would become too immersed in the democracy-led global system to turn against it.

As the 21st century has worn on, however, only those with rose-tinted glasses can still foresee this future, as political confrontation, economic nationalism, and cultural nativism resurface. Deteriorating relations between the U.S. and China, combined with Beijing’s heightened strategic and economic ambitions, have already ushered in renewed great-power competition and an ideological struggle between liberal and illiberal global norms. And now diplomatic fallout from the Ukraine crisis is ricocheting around the world in unanticipated ways, while the strain of the lengthening coronavirus ordeal has the potential to alter the international economic map. As the Russian invasion continues, and China sticks to its zero-COVID strategy, the likelihood of these tensions solidifying competing blocs is only increasing.

China’s leaders have already been unwinding their ties to the world. In recent years, Chinese President Xi Jinping has set in motion policies aimed at creating a new Pax Sinica—an altered world order built by Beijing. With a newly aggressive foreign policy, Xi has apparently come to see the U.S. as China’s chief strategic and economic adversary, and the U.S.-led global system as a constraint on Chinese power. He has taken steps to decrease his country’s reliance on (and thus vulnerabilities to) the U.S. and its allies, stressing a “self-sufficiency” campaign to ensure that China controls the production of items key to the economy by securing supply chains and replacing imports with homegrown alternatives, including microchips and jumbo jets. His Belt and Road Initiative (BRI), ostensibly a development program to build infrastructure in needy nations, is in reality designed to promote Chinese political and business influence in emerging countries and bind them to China through trade, finance, and technology. This reorientation emerges in the pattern of Chinese overseas investment: The U.S. is the top investment destination for Chinese companies on a cumulative basis, according to the latest analysis of Chinese outbound investment from the American Enterprise Institute. But from its peak of $53 billion in 2016, the flow plunged to $3 billion in 2019 and to a (pandemic-hit) $1 billion last year. Growing suspicion of Chinese companies in the U.S. has scared off investment, too. Meanwhile, BRI participants have risen in importance.

In Beijing’s eyes, the Ukraine crisis is likely proof positive that Xi’s course is the best for China’s future. We can’t know with certainty what he and his top policy makers are thinking, but it is safe to assume that they are looking on the stiff sanctions imposed on Russia by a strengthened Western-alliance system with trepidation. Protecting China from just this type of punitive action is a major motivation behind the “decoupling” policies. President Joe Biden probably reinforced Xi’s conviction in a conversation last week by warning the Chinese leader that his country would face consequences if it aided Vladimir Putin’s war effort. 

Meanwhile, the persistent coronavirus pandemic is straining the ties of trade. More than two years after the initial outbreak in Wuhan, China continues to pursue its zero-COVID standard and is still closing down entire cities, sometimes over a relatively small number of cases. The most recent shutdowns hit the country’s two most vital economic centers: Shanghai, the financial capital, and Shenzhen, a major technology and export hub.

In many respects, China’s approach has helped the global economy. Without a significant health crisis, China’s economy and its factories have remained open and on the job, easing already challenged supply chains. Yet the suddenness of these shutdowns has at the same time created uncertainty. Chinese authorities have hinted at a slight relaxation of anti-COVID protocols to exorcise more extreme measures and ease the disruption to a sagging economy—and indeed the shutdowns in Shenzhen and Shanghai have been less severe than elsewhere in China. But these unknowns are adding to the pressure on international companies to diversify their sources of supply away from China, on top of rising costs, political risk, regulatory hurdles, trade disputes, and human-rights concerns. “There is this long-term sourcing diversification out of China,” Stephen Lamar, the CEO of the American Apparel & Footwear Association, a business lobbying group, told me. China’s zero-COVID policy “is another reminder of how problematic it can be to have your supply chains rooted in or passing through China right now.”

his great disentangling may never become a complete divorce. Relocating the Chinese manufacturing operations of a company like Taiwan’s Foxconn, supplier extraordinaire to Apple, is extremely difficult, as the firm’s bungled factory project in Wisconsin showed. There’s no reason to believe Starbucks coffee shops in China will close anytime soon, if ever. The world has been “flattened” so successfully over the past 40 years that unraveling what’s been done may be close to impossible. Unlike the Cold War, when the U.S. and Soviet blocs were clearly delineated, the two segments of the coming world will likely remain somewhat connected.

Yet the outlines of these two spheres are becoming more distinct nonetheless. The fact that the war in Ukraine has alerted the U.S. and Europe to the new threats they face from aggressive authoritarian powers is also contributing to the emerging split by reinvigorating the transatlantic democratic alliance. As NATO solidifies in Europe, in Asia the Quad, a partnership that includes Australia, India, Japan, and the U.S., is coalescing into a China-containment club. Simultaneously, Beijing’s continued support for Moscow is forming the axis of an anti-West coalition, which already includes other destabilizers such as Belarus and North Korea.

Economically, too, Beijing and Moscow are looking to each other to decrease their reliance on the West and its allies: China has long sought to wean itself off the dollar, an exercise Russia is undertaking in real time. Technologically, the lines are being drawn more starkly. China has already separated itself from the global internet with the Great Firewall and is investing heavily in its own chip, AI, and electric-vehicle industries to overtake the technological leadership of the U.S. and its friends in Europe and Asia. Meanwhile, many countries have grown wary of (or been persuaded by Washington against) using Chinese technology, as shown by some governments banning telecom equipment from China’s Huawei Technologies.

As in the Cold War, some nations will be reluctant to take sides. India—a pioneer of the Non-Aligned Movement decades ago—finds itself in the odd position of growing closer to Washington on China policy, but, like Beijing, taking a soft stance on Russia. (Sniffing an opportunity to woo India, China’s foreign minister visited New Delhi last week to improve strained ties, but, in a sign of the complexity of today’s global diplomacy, appears to have made minimal progress.)

As the global divergence continues, however, countries will gravitate toward one side or the other, and (as during the Cold War) not necessarily on clear ideological grounds. Communist Vietnam, fearful of rising Chinese power, is open to American overtures, while democratic Pakistan, a Cold War ally of Washington’s that is now heavily linked to China through Belt and Road investments, has effectively become a client state of Beijing.

Changes in governments and leaders could prevent what seems an inexorable slide into a new world. Barring that, though, what could emerge are two semi-distinct spheres, with tighter economic ties within than between them. Each will use different technology and operate on different political, social, and economic norms. Each will likely point their nuclear missiles at the other and compete in a zero-sum game for power and influence. This is not the world anyone wanted. But it may be the world we’ll get anyway.

Originally published on The Atlantic.

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