Doom-mongers are making the most of the 10th anniversary of that day in September 2008 when Lehman Brothers went belly up, a disaster that would have baleful consequences for tens of millions of people, by warning us that sooner, rather than later, something equally bad or even worse is going to happen. No doubt they are right. Economic booms, even modest ones, almost always end in busts which in hindsight seem inevitable but which few actually predict until it is too late for the people responsible for these matters to do whatever it would take to cool things down.
Since 2008 the Chinese economy has doubled in size. It is now as big as that of the United States; by some accounts, it is even bigger. It is therefore not surprising that many who are currently forecasting big trouble to come have their eyes on China, though some think events in the US, Italy or even Brazil could bring about the next great crash.
The pessimists may be exaggerating the dangers. Prophets are as much in demand today as they were in Biblical times. Gurus who did sound the alarm well before much of the international banking system looked likely to follow Lehman Brothers into a black hole became world-famous and have lived comfortably off the proceeds ever since, so competition among aspirants is fierce.
If the world economy is about to be battered by the storms worried analysts say are lining the horizon, Mauricio Macri’s government made a smart move by asking Christine Lagarde to lend a hand the moment it realised the markets were turning against Argentina. Had Macri waited a few months longer, as many people thought he should have, he could well have found that the International Monetary Fund lacked the kind of money he was after because by then a growing number of other countries would have been pleading for help.
The way things are going, many could certainly need it in the months to come. According to the Organisation for Economic Cooperation and Development (OECD), a rich nations’ club, the increasingly acrimonious trade war Donald Trump is waging against China threatens living standards everywhere. For Argentina too, which is – as we are constantly being reminded – one of the world’s most vulnerable countries, it is already proving costly. A few days ago, soybean prices slumped to their lowest level in 10 years, depriving her of a considerable amount of money, but that was just a pinprick in comparison with the harm being done by the sense of foreboding that has spread throughout the financial markets. Many people feel that the conflict between the reigning superpower and its main rival is certain to get nastier in the next few years so people with plenty of money to play with will become far more reluctant to run risks by investing in dodgy countries prone to defaulting on their debts than would otherwise be the case.
It would be easy to say that Macri and the CEOs accompanying him should have seen all this coming and taken steps to avoid being caught out when the international climate suddenly got much harsher, but while most students of world affairs took it for granted that one day the US would try to do something in an attempt to slow China’s rise, few expected it to happen the way it did. It was long assumed that whoever ran the show in Washington would simply cross his or her fingers and hope that internal problems would prevent the Chinese from acquiring the economic and military power they would need to pose a serious challenge to US hegemony. Such a policy would have had its merits but Trump, with his “America First” mantra, has little interest in a long game. He wants to stop China in her tracks right now.
This will not be easy. One of the many ironies of history is that, seeing they wanted to prolong the “American century”, over the years the US authorities should have done their best to prevent the Chinese from going economically capitalist. Trump may not appreciate it, but it was thanks largely to the determination of the “red Chinese” to make their version of “socialism” work that the US enjoyed over half a century of geopolitical supremacy. Had Mao’s communists not driven out Chiang Kai-shek’s nationalists in 1949, by the 1970s China would in all likelihood have boasted a per capita income similar to that of Taiwan which, given the size of the population, would have been more than enough to make her top nation in economic terms.
Needless to say, red-blooded North Americans did not appreciate their extraordinary good luck. Instead, they shook their fists in fury at the men they said had “lost China”. As firm believers in the superiority of market economies over top-down authoritarian systems, especially Marxist ones, they should have understood that, thanks to the defeat of their allies in a country that, had things gone differently, could have soon become a most formidable geopolitical rival, the US would continue to rule the roost for a long time to come.
That era has come to an end. China may be very poor – on a per head basis, she still lags behind Argentina – but even if she remains at best a middle-income country she will continue to have enough resources to enable her to match the US is most domains. This is already happening. For reasons that have more to do with millennia of Confucianism than with less than a century of Communism, the Chinese are far keener on education than North Americans and their rulers are determined to make the most of the many strategic advantages this penchant gives them.
There is an old African saying: “When elephants fight, the grass suffers.” Despite the violent efforts of Islamists to keep everything that smacks of modernity at bay, the competition, peaceful or not, between China and the US is certain to dominate world affairs for the foreseeable future. Countries such as Argentina will be hard put to avoid getting trampled underfoot while the contestants battle it out without showing much concern for the fate of bystanders. So too, for that matter, will be those of us who on the whole would prefer not to see the present international order, with all its faults, in which big powers pay lip service to the rights of smaller ones, replaced by the decidedly hierarchical arrangement, in which lesser peoples would be expected to pay proper tribute to the rulers of the Middle Kingdom, which the more nationalistic Chinese leaders evidently have in mind.