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Show Me the Money

Show Me the Money

If the United States wants to compete with China in the developing world, we must think economics, not ideology.

Charles Dunst

History will not judge Mike Pompeo kindly. But Donald Trump’s Secretary of State was not all wrong about China. Beijing is an economic predator, and its approach to the developing world puts this in sharp relief. Let the Biden Administration be aware: Money talks, and for years now across the global chessboard, nobody has been as loud as China.

From 2008 to 2019, China’s development financing funds totaled $462 billion, matching those of the World Bank. Yet the Trump Administration still posed to the developing world a choice between “free” American and “repressive” Chinese visions of world order, ignoring that most countries have no interest in making such a choice (leaving alone that many of our partners, from Thailand to Rwanda, are far from “free”). As a result, the Trump Administration’s posture pushed many countries closer to China, thanks to its capital, promised noninterference in domestic affairs, and non-judgmental “community of shared future.

With President Biden in office, the United States has an opportunity to get back on track in the developing world, which remains home to a majority of the world’s population and is the backbone of China’s “community.” But we can’t rely on past strategies to do so. We must address the developing world on its own terms, increasing our economic support to these countries while accepting that most of them will continue engaging both the United States and China.

This change requires that we recognize how badly American exceptionalism has played on the international stage. For far too long, our intellectual approach rendered the world a bloodless set of abstractions, allowing decision-makers to dehumanize the people whose lives their decisions affect. Meeting today’s China challenge requires that Washington abandon this conceit and replace it with a steely-eyed, no-nonsense liberalism free of utopianism and unjustified self-confidence—and whose adherents will convince the developing world in practical terms why our system remains preferable. Liberalism provides a better world order than any alternative or the absence thereof; saving it demands that we return to reality.

Show Me the Money

After World War II, Washington created the liberal international order that lifted billions of individuals out of poverty and brought unprecedented peace among the great powers. Much of the world accepted this order to provide them with the tools for advancement in a way that nothing else could; the Soviet Union’s collapse seemingly confirmed this to be true.

Yet throughout the 1990s, financial crises in places like Thailand, Mexico, and Russia hinted at the system’s weakness: Trillions of dollars could move around the world instantly without oversight. In each case, Washington saved the day by offering emergency financing—and forcing the recipient countries to accept austerity measures, meanwhile lecturing them about fiscal irresponsibility. Then came the 2008 financial crisis, created by American irresponsibility. As President Obama later wrote, “We had beckoned the world to follow us into a paradisiacal land of free markets.… And for the moment at least, it felt to them like they might have followed us over a cliff.” Then-Treasury Secretary Timothy Geithner was blunter: The world was “mad at us for blowing up the global economy.”

Concurrently, China’s authoritarian capitalist model emerged from 2008 relatively unscathed and looking more attractive. Beijing used the crisis to enhance its claim to leadership of the developing world. China once sought Marxist-Leninist revolutions in these countries; now it courts them with “South-South” partnerships based on economic aid and investment minus the pesky strings of democracy and human rights.

The upshot of the Great Recession has been developing countries’ willingness to follow the money—a trend that the covid-19 pandemic will certainly intensify. Most of these countries’ leaders align with Beijing not out of authoritarian solidarity, but to tap into China’s multibillion-dollar global development plan, the Belt and Road Initiative (BRI). Despite concerns about Chinese weaponization of these economic ties, developing countries accept Chinese money because it solves problems and there is no obvious Western alternative. Where poverty and underdevelopment are the most pressing issues, leader simply cannot say “no.”

But there remain frustrations with China’s behavior. Chinese President and Communist Party General Secretary Xi Jinping designed the BRI for China’s benefit and only later branded it as benevolent. Unsurprisingly, then, China uses the BRI to export the domestic overcapacity of state-run and state-aligned companies, to send unemployed Chinese workers abroad, and to impose Chinese standards the world over. But the BRI is far from the “highly centralized and coordinated” initiative Beijing presents it to be. In reality, it is a “highly centralized and coordinated marketing campaign” attached to the uncoordinated activities of Chinese businesses trying to maximize their own returns. BRI projects frequently lack oversight and are beset by corruption, sometimes with deadly consequences.

Concerns about self-dealing, along with resentment of China’s recent aggressiveness, have angered local populations and put pressure on BRI recipient governments. Elections have swung on anti-Chinese sentiment, with China having to renegotiate deals when power flips. In early 2020, Tanzanian President John Magufuli canceled two China deals that his predecessor had signed, explaining that only a “madman” or a “drunkard” could have accepted China’s terms.

Similar discontent is evident even in Southeast Asia, China’s historical backyard, the gateway for its global expansion, and “testing ground” for its strategies. Throughout the 2018 Malaysian election campaign, Mahathir Mohamad lambasted his opponent, Najib Razak, for accepting $30 billion in Chinese infrastructure investment. After Mahathir came to power, he said of his predecessor’s deals, “Such stupidity has never been seen before in the history of Malaysia.” In August, he visited China to renegotiate these deals, warning of a “new colonialism.” His government later implemented anti-China policies at home and stood up to Beijing at sea.

Yet by October, Mahathir had softened, saying that China’s efforts were not comparable to colonialism. By March 2019 he had almost entirely reversed course, saying that if forced to choose between Beijing and Washington, he would ally with the “rich” China rather than the “unpredictable” America. In September he said there was no point in confronting China; Malaysia should defer to China as it had “for the past 2,000 years.” Later that month, he made his position even clearer. “We are forced to” accept Chinese financing, because “we just couldn’t afford” not to. He added, “Whether we like it or not, we have to go to the Chinese.”

Don’t Complain—Compete

Only the “irredeemably corrupt or terminally naive” take seriously Beijing’s “win-win” rhetoric. Indeed, most developing world leaders know that China has little regard for its junior partners, but, like Mahathir, without other options they still “go to the Chinese.”

Mahathir’s calculations aside, people from Cambodia to Kenya are increasingly put off by China’s behavior. Yet Trump Administration officials’ denunciations of Chinese belligerence struggled to gain the United States much traction.

Especially after the Trump years, the harsh truth is that American “freedom” is not inherently more attractive to the developing world than China’s Sino-centric approach. Leaders are not interested in adopting our values wholesale or in choosing between Washington and Beijing. They aim to play the great powers off against each other to extract more benefits from both, but they increasingly prefer China’s predictable bullying to America’s unpredictability.

Yet China’s success is not foreordained. It is as much a product of what Beijing does as what Washington does. The United States, accordingly, needs to move beyond ideological rhetoric and contribute to countries’ bottom lines: The Biden Administration will have to provide meaningful alternatives to Chinese capital. Biden must also engage these countries as partners, allowing them their cherished autonomy. Beijing, which considers itself the seat of a superior civilization and exacts deference from its subordinates, cannot do the same.

Biden cannot match Xi’s seemingly endless ability to marshal state funds for the BRI, but he can put our system’s liberal credentials on display by developing compelling alternatives. Coordinating with Japan and Australia on infrastructure investment is promising. So are multilateral trade deals, like those the Trump Administration abandoned in the Trans-Pacific Partnership, which allow countries to benefit from U.S.-led investment without forsaking Chinese funds. The U.S. International Development Finance Corporation, with a lending capacity of $60 billion, can also come into play.

The Biden Administration has yet other cards to play. Washington can collaborate with America’s unparalleled network of allies and partners to address global threats like pandemics by providing economic investment and social opportunities. This effort should feature environmental and transparency mechanisms, pledge to employ local rather than imported workers, and ensure quality. These are all respects in which the BRI, to the consternation of local partners, frequently fails. Such cooperation would highlight the flaws in Chinese standardization and make sure that developing countries would no longer “have to go to the Chinese.” It would also allow the United States to push back against China from a position of strength, not just haphazardly through bilateral arrangements.

New Challenges, New Strategies

The task at hand for the United States, then, is not to simply make the moral case for liberalism, as we did during the Cold War, but the economic case. Circumstances and strategic conditions change. China poses in many ways a far more daunting challenge than the 20th-century Soviet Union.​

The Soviet Union never provided a roadmap to the good life; China, which is already the world’s largest economy when adjusted for purchasing power parity, does. As the United States complained about Beijing’s predation, hundreds of millions of people bought into the Chinese dream of “authoritarian modernity.” The idea that prosperity required freedom, a key tenet of the liberal order, was apparently a mirage of the post-Soviet era.

Our liberalism, then, cannot assume that it is pushing on a door ajar to victory. To succeed, we will not only have to better practice the liberalism we preach, but sweeten the deal with economic benefits. If Biden hopes to secure and expand the “free world,” his administration must replace Washington’s ideological blinders with steely eyes to push back against China’s influence. We need to engage the developing world on truly liberal terms. Such an approach must begin with economics.

Charles Dunst, a contributing editor of American Purpose, is a visiting scholar at the East-West Center in Washington and an associate at LSE IDEAS, the London School of Economics’ foreign policy think tank. Twitter: @CharlesDunst

ChinaU.S. Foreign Policy