China’s growth is also running on credit; the People’s Republic is similarly indebted to the descending Western centers of the world system. This trend toward de-dollarization can only be properly understood against the backdrop of the imperial descent of the United States in the context of the global crisis process.
Why China won’t replace the U.S. as hegemon
Chaos instead of hegemony
The U.S. is in crisis as a hegemonic power, but that does not mean China will inherit it. Still, authoritarian dictatorships in
by Tomasz Konicz
[This article posted on 4/20/2023 is translated from the German on the Internet, Chaos statt Hegemonie.]
Xiangyun, one of China’s largest vacant new cities
If that’s not a signal crisis set in concrete. Xiangyun, one of China’s largest vacant new construction cities, in 2020.
The rise of the People’s Republic of China is changing the world. Felix Wemheuer showed what different left positions there are on China (10/2023). Ralf Ruckus argued that China’s characterization by capitalist relations of violence must be the starting point of left criticism (11/2023). Michael Heidemann criticized the disregard for civil liberties in many left-wing discussions about China (12/2023). Ernst Lohoff warned that China is striving to impose its illiberal model of rule internationally (14/2023). Hauke Neddermann believes that German leftists should not forget the role of European colonialism in the current criticism of China (15/2023).
If one believes the declarations of Russian-Chinese summits, the 21st century will be defined by an era of Chinese hegemony. At bilateral Moscow war summits in mid-March, Russian President Vladimir Putin advocated “building a more just multi-polar world order” that would put an end to the era of U.S. hegemony.
Talk of a multi-polar world order is the ideology of all those authoritarian states of the semi-periphery that seek, by means of imperialist power and war policies, to inherit the declining United States in order to achieve at the regional or, like China, even at the global level, a supremacy or dominance similar to that enjoyed by the United States in the second half of the 20th century.
The current increase in regional interstate conflicts is an expression of this multi-polar world disorder in a global crisis phase in which there is effectively no longer a world hegemon. Whether it is Russian imperialists, Iranian mullahs or Turkish neo-Ottomanists, it is primarily envy of the dwindling means of power of the United States that motivates their ideological anti-Americanism.
The dwindling power is evidenced above all by the U.S. dollar. As the world’s reserve currency, it gave the U.S. the opportunity to run up enormous debts, not least to finance its military machine. When Turkish President Recep Tayyip Erdo?an starts the printing press, however, inflation in the country only increases.
That is why the latest monetary policy agreements between China, Russia and a number of semi-peripheral states are causing a stir. In mid-March, during a state visit to Riyadh, Chinese President Xi Jinping touted a switch in oil trade with Saudi Arabia to the Chinese yuan to counter the “increasing weaponization of the dollar.” Similar bilateral currency arrangements are under discussion between China and Brazil, Pakistan, and Venezuela. The Financial Times warned back in March that Western leaders should prepare for a coming “multi-polar currency world order,” even though the dollar is still clearly the most widely used currency in international trade at present.
China’s growth is also running on credit; the People’s Republic is similarly indebted to the descending Western centers of the world system.
This trend toward de-dollarization can only be properly understood against the backdrop of the imperial descent of the United States in the context of the global crisis process. However, this also makes clear why China is unlikely to be able to inherit the United States as hegemon.
In his work “Adam Smith in Beijing,” the Italian sociologist Giovanni Arrighi described the history of the capitalist world system as a succession of hegemonic cycles: A rising power gains a dominant position within the system in an ascendant phase characterized by commodity-producing industry; after a “signal crisis,” the imperial descent of the hegemonic power begins. In this process, the financial industry gains in importance. Finally, the replacement of the old hegemon by a new one with greater means of power takes place.
This sequence can be traced empirically in the case of both the United Kingdom and the United States. The United Kingdom and its empire, which rose to become the workshop of the world during industrialization in the 18th century, transformed into the world’s financial center in the second half of the 19th century before being replaced in the first half of the 20th century by the economically ascendant United States, which in turn experienced its signal crisis during the stagflation of the 1970s. After this, the de-industrialization of the U.S. set in, leading to the economic dominance of the U.S. financial sector. The indebtedness of the descending hegemon to the imperial ascender, which Arrighi also addressed, can be seen both in the case of Britain vis-à-vis the United States and in the United States’ rising trade deficit with China.
The U.S. dollar thus gained its world position in the context of the postwar Fordist boom, when the Marshall Plan also established U.S. hegemony in the western part of devastated Europe. And it was precisely this prolonged period of Fordist expansion that formed the economic foundation of U.S. hegemony. With the end of the postwar boom in the stagflation phase, financialization and the imposition of neoliberalism, the economic basis of the Western hegemonic system changed. In the worsening systemic crisis of overproduction, the increasingly indebted U.S. became, in a sense, the “black hole” of the world system, absorbing the surplus production of export-oriented states like China and FRG through its trade deficits – at the price of advancing de-industrialization and indebtedness. The Chinese regime thus had every reason (just like the German government) to tolerate U.S. hegemony and the dollar as the world’s reserve currency, because without the U.S. sales market, China’s rise to become the new “workshop of the world” would not have been possible.
And yet, because of the unfolding world socio-ecological crisis of capital, the 21st century is unlikely to bring an epoch of Chinese hegemony, the yuan will not be able to inherit the US dollar. The ascendant phase of the People’s Republic, marked by the dominance of industrial commodity production, occurred within the framework of the aforementioned global deficit cycles, in which debt in the West generated demand for Chinese exports. This phase ended with the crisis surge of 2008. With the bursting of the real estate bubbles in the U.S. and Europe, China’s extreme export surpluses declined (with the exception of trade with the U.S.), while the gigantic stimulus packages launched by the government in Beijing at that time to prop up the economy changed the nature of the Chinese economy: exports lost importance, and the credit-financed domestic construction industry and the real estate sector henceforth formed the central drivers of economic growth.
Thus, China has obviously already passed its signal crisis marking the transition to a financial market-driven growth model in 2008. China’s growth is thus also running on credit, and the People’s Republic is similarly highly indebted to the descending Western centers of the world system. The Chinese deficit economy is generating even greater speculative excesses than was the case in the U.S. or Western Europe, as the crises in the inflated Chinese real estate market in 2021 made evident. Economically, the hegemonic decline of the People’s Republic due to the global systemic crisis has thus already begun, even though it has not yet been able to achieve its hegemonic position geopolitically.
This is particularly evident in China’s foreign policy ambitions, where an ambitious global development project was initiated with the “New Silk Road,” modeled on the Marshall Plan-and which brought the People’s Republic its first international debt crisis. According to the Financial Times, of the roughly $838 billion China invested to build a country-centered economic and alliance system in developing and emerging economies through 2021, some $118 billion is at risk of default in the wake of the current crisis surge (due to pandemic and Ukraine war).
Currently, there is no global economic recovery in sight, only over-indebtedness and inflation. Thus, China’s teetering mountains of debt, both domestically and abroad, make it look as if it were in decline even before it achieved hegemony. In addition, there is the external, ecological barrier of capital, since the People’s Republic, in the course of its state capitalist modernization, would become the largest emitter of greenhouse gases, which, because of the threat of climate catastrophe, makes a similar development path for other countries of the Global South ecologically extremely doubtful (even if it is downright obscene to preach renunciation from the centers to the Global South without being able to point out a development alternative). The historical hegemonic cycle of the capitalist world system is thus superimposed on the socio-ecological crisis process of capital itself, interacting with it and allowing China’s hegemonic rise and fall to merge.
And yet, against the backdrop of the socio-ecological crisis, the struggle between Russo-Chinese Eurasia and the United States’ Oceania, in which Ukraine and Taiwan form the current and a future battleground, respectively, can certainly also be understood as a struggle between the future and the past. It is a struggle between the ending era of neoliberal crisis management and the looming age of openly authoritarian rule, in which reactionary mobilization and social disintegration interact, as is paradigmatically visible in the Russian state oligarchy and mafia rule.