Survival: Global Politics and Strategy, vol. 52, no. 4, August–September 2010, pp. 31–54
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<First 500 words>
The dramatic economic developments that began to unfold in the summer of 2008 have been widely compared to the Great Depression of the 1930s. At that time, a sharp drop in stock prices was accompanied by a banking crisis, which led to a protracted slowdown in global growth, the rise to power of fascist regimes in Europe and Asia and, ultimately, the outbreak of the Second World War. While the first several steps in the current crisis appear similar (market crash, bank failures, global slowdown), its full economic, political and strategic implications are not yet clear.
Among the many potential consequences of the recent downturn and its aftermath could be increased friction between the United States and China and an intensification in their evolving military and diplomatic rivalry. In addition to altering their bilateral interactions, the global slump could affect the ability of both countries to pursue a long-term strategic competition, as well as changing their position in, and relationship to, the rest of the international system.
Several caveats are in order here. Firstly, and most obviously, the crisis that began in 2008 has yet to run its course. The ultimate duration and depth of the current economic slowdown will go a long way towards determining the full extent and character of its strategic implications. Other things equal, the more protracted and severe the slump, the greater the likelihood of dramatic and potentially dangerous effects. A full accounting of the likely economic impact of various scenarios on the United States and China would also require a systematic analysis of their trade and investment with the rest of the world, and with each other, something that is beyond the scope of this article.
Finally, as will quickly become apparent, the three aspects of the Sino- American relationship discussed here are closely intertwined. Thus, for example, the growth trajectories of the United States and China will depend, in part, on the state of their bilateral relations and will in part determine their future roles in the international system. Dividing the problem into three separate pieces helps to make it more tractable analytically, albeit at the cost of some oversimplification.
Internal effects
In broad outline, the United States and China passed through similar experiences following the start of the global financial meltdown nearly two years ago. Both experienced sharp drops in aggregate demand and a decline in growth rates (in the US case triggered by a contraction of credit and the collapse of consumer spending, in China as the result of a sharp fall-off in exports) and both initiated large-scale stimulus programmes designed to boost demand and restore growth. In the US case the slowdown was sufficient to tip the economy into a protracted recession; in China expansion slowed briefly and then resumed at near pre-crisis rates. The difference in the two countries’ performance has caused some observers to conclude that China must be the ‘winner’ in the current crisis. From a geopolitical perspective what matters most are relative rather than absolute gains ...
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Aaron L. Friedberg is Professor of Politics and International Affairs at Princeton University. A new edition of his 1988 book The Weary Titan: Britain and the Experience of Relative Decline, 1895–1905 will be released in the autumn by Princeton University Press. His latest book on the emerging US–China rivalry will be published in spring 2011 by W.W. Norton.
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