Posts Tagged ‘geoeconomics’
“A creditor is worse than a slave-owner; for the master owns only your person, but a creditor owns your dignity, and can command it.”*…
Developing countries around the world are deeply in hock. According to UNCTAD (UN Trade and Development), global public debt reached a record high of $102 trillion in 2024. Although public debt in developing countries accounted for less than one third of the total – $31 trillion – it has grown twice as fast as in developed economies since 2010. Those developing nations had debt service on that external public debt of $487 billion in 2023– which meant, for half of them, paying at least 6.5% of export revenues to service external public debt. More practically, that means that 3.4 billion people are living in countries that spend more on interest than on healthcare or education. [See the UNCTAD fact sheet here.]
Not surprisingly, developing countries sometimes fall sufficiently behind to call their loans into question. When that happens, an under-the-radar “informal group” of creditors– the Paris Club– gets together to negotiate a way forward…
The Paris Club is an informal group of official creditors whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by debtor countries. As debtor countries undertake reforms to stabilize and restore their macroeconomic and financial situation, Paris Club creditors provide an appropriate debt treatment. Paris Club creditors provide debt treatments to debtor countries in the form of rescheduling, which is debt relief by postponement or, in the case of concessional rescheduling, reduction in debt service obligations during a defined period (flow treatment) or as of a set date (stock treatment).
The origin of the Paris Club dates back to 1956 when Argentina agreed to meet its public creditors in Paris. Since then, the Paris Club has reached 484 agreements with 102 different debtor countries. Since 1956, the debt treated in the framework of Paris Club agreements amounts to $616 billion.
The 22 members of the Paris Club are mostly the larger OECD members, plus Russia. South Africa is a prospective member, and China and India are Ad Hoc members. Organizations like the IMF, the World Bank, the African Development Bank, the Asian Development Bank, the Inter-American Development Bank, and the OECD are “observers.” Participants representing members are government officials. The U.S., for instance is represented by a State Department official (relying on positions formulated by the Treasury Department).
Sven van Mourik puts all of this into context…
In today’s world, finance is dominated not by states, but by private actors. The market capitalization of a company like Apple in December 2023 reached $3 trillion, exceeding the combined GDP of at least 140 countries. Last year, global private financial assets reached a record $291 trillion, of which some 50 percent is concentrated in North America. By contrast, the world’s nations together owed a global public debt of a record $102 trillion in 2024, of which so-called “developing” countries owe $31 trillion. While there’s a playbook for private debt and corporate bankruptcy, it’s a different story for the official debt owed by nation states. What happens when a state can no longer repay its foreign creditors?
Following a deep global debt crisis in the early 1980s, the world’s poorest states struggled to service impossible debts to foreign capital, leading to widespread revolts and humanitarian crises across the formerly colonized, developing countries of the Global South. Following the COVID-19 pandemic of 2020, the burden of this public debt is once again immense…
[van Mourik reviews some of the startling statistics cited above…]
… It is puzzling to see states prioritize the servicing of foreign debt, even when it directly harms their populations. Why not default? Experts at the International Monetary Fund and World Bank in Washington, D.C. claim that “there is no alternative” to what has become an ossified response to sovereign debt crises: cut the government budget, facilitate the private sector and grow your economy to repay your foreign debt. But what about when a state, fully cooperative with the policy measures prescribed by these institutions, still cannot repay its debts?
As a financial historian, this question led me to investigate a creditor that routinely takes center stage as countries attempt to navigate sovereign default, an institution so secretive that it has largely escaped the public eye. The Paris Club, an informal forum of representatives from creditor countries largely in the Global North, has steered the destinies of nations in financial peril, restructuring over half a trillion dollars in sovereign debt since its first meeting in 1956. Without its approval, countries face default and can effectively be prevented from accessing long- and short-term trade credit — credit that facilitates the uninterrupted flow of goods across borders, and can be compared to a country’s life blood. Without it, states are unable to access vital imports like food, fuel and medicine.
The Paris Club convenes to set up a new payment schedule for a country at risk of defaulting on its “official” debt owed to other countries. It is unique in that despite its pivotal role, it remains an informal institution. It comprises 22 major creditor countries, including the United States, Germany and France, and occasional ad hoc participants like India and China, which together coordinate reduced or rescheduled debt payments for a country facing default.
The Paris Club itself doesn’t lend new money. Instead, it “treats” a country’s debt payment schedule, either through rescheduling interest payments or, since the late 1980s, by offering the poorest countries a “haircut” and partially restructuring the debt. In its 70-year history, including the recent Debt Service Suspension Initiative, the Paris Club has treated a total of $863 billion of debt for 102 countries through 543 agreements; this amounts to around two-thirds of the world’s sovereign debt restructurings through 2010. A staggering legacy for a group that lacks any public oversight. With some pride, former chairmen of the Paris Club’s secretariat have called the Club a “non-institution” and “totally discreet if not secretive.”…
[van Mourik unpacks the operations of the Club and explains its symbiotic relationship with the IMF and its “structural adjustment” programs– AKA “austerity,” the reduction of debtor government expenses, often on social welfare, education, and healthcare (and often to painful effect)
… While the Paris Club rescheduled debt payments, the IMF designed programs that served to optimize a country’s ability to pay back interest and principal; the arrangement has over the years evolved into a debt restructuring routine in which debtor countries have little say.
The IMF today remains an institution in which the countries of the Global North have nine times more voting power than the countries of the Global South, as voting rights are tied to economic weight. In the Paris Club, a similar power differential is reflected in the spatial and temporal arrangement of the procedures, which borders on the theatrical. A debtor country’s delegation only ever confronts its creditors alone and is required to leave the room when they deliberate to set the terms of a deal…
[van Mourik explores the consequences of these deals, concluding…]
… creditor-dominated organizations like the IMF and the Paris Club allow rich countries to remain at the helm of a sinking ship. After all, as economist Daniel Munevar concluded following the COVID-19 pandemic, continuing within our current framework of debt servicing would “sound the death knell” for the world’s climate ambitions, as it prevents debtor countries from implementing the costly policies needed to meet ambitious climate targets. Others conclude that a serious degrowth strategy, one that prioritized ecological sustainability and social well-being over growth for its own sake, would require the countries of the Global South to default.
Various formations of countries across the Global South have proposed debt restructuring regimes, like the UN Framework Convention on Debt, that would “improve the fairness and transparency of debt resolution mechanisms.” Gabor, the economist, has called this new UN framework “a bid to wrest deliberative control away from the closed-door clubs where Northern financial might prevails.”The question is under what circumstances such strategies might be successful. Despite the Paris Club’s inclusion of non-Western members like Korea and Brazil, or the IMF and the Paris Club’s recent collaboration with China and the G20, the deck remains stacked against low-income borrowing countries, who “have little voice in any of these fora.”
The deeper challenge for all states is to reform a global financial architecture that evolved based on the interests of a handful of Western creditor states, at the cost of austerity and social destruction elsewhere. Debtor countries that wish to retain access to global markets — even for the most vital imports — must participate, and service their debt within regulatory frameworks over which they have no control and which have proven to be defective…
Who really controls international debt? “The Quiet Powerbroker,” from @thedialmag.bsky.social.
All this said, it’s important to note that in fact an alternative is emerging, but not one that’s in the spirit of the UN Framework. Even before the Trump Administration took the U.S. off the field, China had become the world’s largest development lender.
“How China Lends: A Rare Look into 100 Debt Contracts with Foreign Governments“:
We collect and analyze 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries in Africa, Asia, Eastern Europe, Latin America, and Oceania, and compare them with those of other bilateral, multilateral, and commercial creditors. Three main insights emerge. First, the Chinese contracts contain unusual confidentiality clauses that bar borrowers from revealing the terms or even the existence of the debt. Second, Chinese lenders seek advantage over other creditors, using collateral arrangements such as lender-controlled revenue accounts and promises to keep the debt out of collective restructuring (“no Paris Club” clauses). Third, cancellation, acceleration, and stabilization clauses in Chinese contracts potentially allow the lenders to influence debtors’ domestic and foreign policies. Even if these terms were unenforceable in court, the mix of confidentiality, seniority, and policy influence could limit the sovereign debtor’s crisis management options and complicate debt renegotiation. Overall, the contracts use creative design to manage credit risks and overcome enforcement hurdles, presenting China as a muscular and commercially-savvy lender to the developing world.
For a fascinating and illuminating on-the-ground consideration of these issues, see/hear Mary Kay Magistad‘s On China’s New Silk Road.
* Victor Hugo
###
As we redesign debt, we might send thoughtful birthday greetings to Jean-Jacques Laffont; he was born on this date in 1947. An economist, he made pioneering contributions in public economics, development economics, and the theory of imperfect information, incentives, and regulation. Over the course of his career, he wrote 17 books and more than 200 articles. His 1993 book A Theory of Incentives in Procurement and Regulation, written with Jean Tirole, is a fundamental reference in the economics of the public sector and the theory of regulation. Laffont died in 2004; had he lived, he might well have shared the 2014 Nobel Prize for Economics awarded to his colleague and collaborator Jean Tirole for the work they did together.
He was uninvolved in the Paris Club; indeed, his last book, Regulation and Development, discussed policies for improving the economies of less developed countries in ways more consistent with the UN’s new framework than the IMF’s old-but-still-dominant playbook.
“The metaphors we use deliver us hope, or they foreclose possibility”*…
It feels only too clear that the global order that defined geopolitics, geoeconomics, and life in the world’s constituent parts is changing fundamentally. But what lies on the other side of this change? It’s a sucker’s bet to try to predict that outcome with any precision; there’s just too much fundamental uncertainty. As Antonio Gramsci said (of another era, though he might have been describing ours): “The old world is dying, and the new world struggles to be born: now is the time of monsters.”
Still, it’s important that we try. It’s only by wrestling with what’s going on to determine what’s possible, then what’s desirable, that we can shape a future in which we want to live.
The models and metaphors that we use are key to that wrestling. Our natural inclinations seem to tend in one of two directions. Either we tweak the models we have to try to accomodate the change that we see… which seems to work until (given that the change just keeps on coming) it doesn’t. Or we flip to the opposite– we imaging that everything simply falls apart. In geopolitical/geoeconomic terms, we assume that we get an incrementally-revised version of the world order that we’ve known; or we imagine dissolution (into what tends to be called a “multi-polar” world)… neither of which imagines materially different world orders that, as hard as they are to describe, are entirely plausible. Part of our problem in visualizing those new orders is our lack of models and metaphors for them…
The two pieces featured here posit frameworks and metaphors that, while they may or may not prove to be “accurate” in any comprehensive way, can help us open our thinking, and model the ways in which fresh metaphors can help us see problems anew and find new solutions.
First a piece from Trine Flockhart, from the Global (Dis)Order International Policy Programme of the British Academy and The Carnegoe Endowment for International Peace, part of a recent book)…
Is global order a thing of the past? Is the liberal international order fraying and what is
happening to previously stable alliances and cooperative relationships such as the
transatlantic relationship or the relationship between the United States and Canada? Not
such a long time ago, these questions would have been regarded as alarmist, but today the
prospect of large-scale order transformation is part and parcel of daily debates. This rupture
is probably as important as the transformation that followed the end of the Second World War,
and together with the simultaneous transformations in technology and science, the impact
on people and societies may well be on par with the Industrial Revolution. As Gramsci wrote
from his prison cell, we live ‘in times of monsters’ where ‘the old world is dying and the new one
struggles to be born’(Gramsci & Buttigieg 1992). In these circumstances, we see the political
consequences in populist parties as voters seek certainty in an uncertain and turbulent world,
whilst policymakers struggle to find their feet in the emerging world and seek to manage the
fallout from the ending of the old world.
To ensure that the policy decisions of today are relevant for the geopolitical reality of tomorrow,
policymakers must have a clear sense about the likely outcome of the ongoing transformation
– in other words what kind of global order will be in place and what kind of relationships can
be expected within it? These are big and complex questions that have no easy answers, yet
many scholars and policy practitioners seem to already have their answer – the world will be
multipolar (Ashford 2023; Bekkevold 2023; Borrell 2021). At least anecdotally, it seems there
is widespread agreement that the international system is transforming from a unipolar system
anchored in American hegemony, to a multipolar system reflecting the shift of power to a larger
number of states. However, although the idea that the international system will be multipolar
is persuasive, and although the use of analytical concepts such as polarity can be useful for
gaining an overview of complex matters, we must be aware that polarity as a concept rests on
a specific form of analysis that tends to emphasize states, sameness, power and interest, and
which is only partially sighted when it comes to values, identities, lesser powers and complexity.
I worry that the focus on multipolarity, means that policymakers are trying to understand the
current order transformation through conceptual lenses that are blurred and not very relevant.
This article presents a different position. It starts from the counterintuitive position that
it is logically implausible for the global ordering architecture to return to an international
system that was in place a century ago. Those suggesting that we are currently witnessing
a return to multipolarity emphasise shifts in the global distribution of power and the rising
number of powerful states, most notably China. These are certainly important changes, but
The arrival of the multi-order world and its geopolitical implications
other important changes are overlooked, which suggest a fundamentally different global
ordering architecture is in the making. Continuing to portray the world as multipolar belies the
complexity, significance, and extent of many other important changes. This paper presents an
alternative interpretation of the ongoing global order transformation, demonstrating why it will
be neither bipolar nor multipolar but rather multi-order.
A multi-order world is a global ordering architecture consisting of several international orders.
Gramsci was right that order transformations take time, so the multi-order architecture is still
in development, but can be glimpsed through the existence of three independent international
orders already clearly visible within the global ordering architecture – the American-led liberal
international order (albeit that American leadership under Trump is currently in question),
the Russian-led Eurasian order, and the Chinese-led Belt and Road order.1 Other orders and
other forms of relationships of importance are also in the making suggesting a more complex
architecture than a multipolar one. The paper does not claim to present a full picture of the
emerging ordering architecture but seeks merely to demonstrate the importance of embracing
new thinking to contemplate the possibility of an entirely new form of international system
in which multiple international orders with very different dynamics and different behavioural
patterns make up the global ordering architecture. The perspective brings into light important
relationships and dynamics that are not readily apparent in the multipolar perspective –
especially that relationships within orders are just as important as relations between different
international orders, and it leaves room for considering other aspects than powershifts and for
acknowledging the importance of other actors than just a handful of “pole states”. I argue that
awareness of the subtle differences between the multi-order architecture and more traditional
polarity-based understandings is an essential first step towards timely strategic policymaking
fit for the multi-order world.
The paper proceeds in four moves. First, I outline three significant events over the past four
years which only partially fit the polarity-based narrative. Second, I outline the multi-order
perspective by focusing on order as a condition, a social domain, and as practices of ordering.
Thirdly, I show how changes in three characteristics of the global system indicate a multi-order
world rather than a multipolar one. Finally, I briefly consider some of the broader geopolitical
implications of a multi-order world and demonstrate the importance of ordering dynamics
within and between international orders. The picture that emerges challenges some of the
most foundational assumptions about international relations and global order including the
prospect of achieving convergence around common rules in multilateral governance to meet
shared challenges…– “The arrival of the multi-order world and its geopolitical implications”
The second, by Jessica Burbank, takes a different– and in some ways, more provocative– tack…
… A new world order is here. States (countries) are no longer the highest form of power globally. Power has shifted to wealthy individuals who work in groups and operate across borders: syndicates of capital.
Syndicates of capital cannot be categorized as legal or illegal. They exist primarily in the extralegal sphere, where either no regulations apply to their behavior or, where laws do exist, there is no entity powerful enough to enforce them in a manner that asserts control over the syndicates’ behavior.
In many occasions, capital is both the power source for syndicates, and the shared goal. Wealthy individuals form syndicates if their strategic objectives align. Those objectives typically revolve around securing new capital flows and preserving existing ones. Syndicates’ power is vast but fragile. If all members of a syndicate were cut off from accessing capital and the resources they control, they would lose their power.
Author’s Note: Sorry to disappoint the conspiracy theorists, but I am not speaking of secret societies, the illuminati, or a cabal. Syndicates of capital do not hide their power, nor do they operate in secret. Their multi-billion dollar deals and contracts are publicly disclosed. They are also not united in ethnic background, religious, or political beliefs.
It is not enough to say: ‘democracies are being replaced with oligarchies because wealthy individuals have too much power in society.’ That may be true, but is not the full picture. Oligarchies are states run by a small group of wealthy individuals. That may accurately describe the politics of one nation, but it does not suffice to describe how power is organized on a global scale.
‘Global oligarchy’ also falls short of describing how power is organized in our world, because there is not one small group of wealthy individuals, there are many, and they compete. Still, the identification of oligarchs is useful for global political analysis because many of the oligarchs within a state also operate globally as leaders or members ofsyndicates of capital.
The new world order emerged before it could be identified. Platitudes like: “our world has gone crazy,” served as an emotional crutch, and an implicit acknowledgement that we lack a sound analysis of contemporary global power. What has felt like an ineffable force, an inexplicable undercurrent of darkness, is the ambiance of global dominion by syndicates of capital.
Though abstract, examining how global power is organized is essential to understanding the world we live in. Developing a coherent framework for evaluating global affairs allows us to more effortlessly make sense of current events. You’ll be surprised how quickly things click and how easily your mind makes connections when you absorb the news with a conception of syndicates of capital…
Both are eminently worth reading in full: whether or not one buys all– or any– of either set of conclusions, the mental calisthenics are the point…
###
As we muse on metaphors, we might recall that it was on this date in 1279 that Mongol forces led by Kublai Khan were victorious at the Battle of Yamen— ending the Song dynasty in China. Kublai has already conquered parts of northern and southern China, and had declared the Yuan dynasty (with himself as the emperor “Great Yuan”). With the fall of the Song, the Mongols ruled all of continental East Asia under Han-style Yuan rule, which was a division of the Mongol Empire.
“The Middle East has oil, China has rare earths”*…
Often called “the seeds of technology,” rare earths are a group 17 metallic elements (the 15 lanthanides plus scandium and yttrium) with unique magnetic, optical, and catalytic properties vital for electronics, defense, chemical processing, petroleum refining, and green energy.
China’s dominance over rare earth elements creates an unprecedented vulnerability in global supply chains that extends far beyond the relatively modest $6 billion market size. The risk of disruption in supply of rare earths has become a critical concern as the nation controls 69% of worldwide mining operations, 92% of refining capacity, and a staggering 98% of permanent magnet production, according to Goldman Sachs analysis from October 2025.
This concentration represents one of the most significant single points of failure in modern industrial infrastructure. Furthermore, the rare earth reserves distribution globally shows heavy concentration in geologically limited regions, making supply diversification extremely challenging.
The economic implications of this dominance become clear when considering potential disruption scenarios. Goldman Sachs warns that even a 10% disruption in industries reliant on rare earth elements could trigger $150 billion in lost economic output, alongside inflationary pressures cascading through multiple sectors. Despite rare earth markets being 33 times smaller than copper markets, their strategic importance creates disproportionate systemic risk…
– “China’s Rare Earth Dominance Creates Global Supply Disruption Risks” [source of the image above, and worth reading in full]
Farrell Gregory explains why they figure so prominently in so much discussion of the global economy and of U.S.- China relations and what we might expect…
Over the course of the last year, we’ve seen China suspend rare earth exports twice, generating a short-lived round of public interest and short-lived “expertise” in America. Each crisis followed a similar progression: an aggrieved China introduces export licensing, effectively suspending US access to certain rare earth elements and downstream products. The American public is subjected to alternating shouts of panic and confident assertions that ‘rare’ is a misnomer and the necessary elements are actually abundant in the Earth’s crust. After a period of confrontation, and likely following concessions on both sides, access is reestablished before too much harm is done.
Examining the differences in each crisis is less important than establishing what is quickly becoming a pattern: China is increasingly willing and able to use its dominance in rare earths as leverage against the U.S. It’s worth noting what a change this is from even five years ago: during the entirety of the 2019-2020 U.S.-China trade war, Beijing never introduced export controls for rare earths, despite making threats to do so. Now China assesses its position differently — they’ve accumulated leverage and they’re willing to use it with increasing frequency.
This frequency might be in part because China’s dominant position in rare earths is a time bomb for both sides. The PRC likely wants to use its REE dominance to extract further concessions before the U.S. manages to defuse this dominance with some combination of reshoring and tech advances.
I think it’s a matter of when — not whether — China decides to activate its standing export control infrastructure. They’ve built up leverage, and over time, that leverage will dissipate. In the near-term future, throttling rare earth and magnet exports is still an effective threat to employ in trade disputes with the U.S. In the medium term, successful reshoring and reliance-decreasing efforts will diminish what concessions China can extract from the U.S.
So, expect the rare earth crisis cycle to play out again. When it does, here are a few clarifications on rare earths that may prove helpful for avoiding the most common misperceptions…
Read on: “China’s Rare Earths Chokehold: A Primer,” from @chinatalk.skystack.xyz.
See also: “Rare Earths,” from @profgalloway.com.
And also this: “China Is Overplaying Its Rare-Earth Hand in Japan” from @bloomberg.com (gift article).
* attributed to Deng Xiaoping
###
As we ponder paucity, we might recall that it was on this date in 1839 that the British East India Company [see here and here] established the Assam Tea Company and began the commercial production of tea (grown from slips furtively exported from China) in the region. Beginning in the 1850s, the tea industry rapidly expanded, consuming vast tracts of land for tea plantations. By the turn of the century, Assam became the leading tea-producing region in the world. That growth and innovations in tea preparation caused the price of tea to drop and demand to grow. Soon, London became the center of the international tea trade.
“Mastering others is strength; mastering yourself is true power”*…
After skipping last year (presumably to finish his best-seller Breakneck: China’s Quest to Engineer the Future), Dan Wang is back with his “annual letter.” An excerpt…
… I think the US continues to systematically underrate China’s industrial progress for several reasons.
First, too many western elites retain hope that China’s efforts will run out of fuel by its own accord. Industrial progress will be weighed down by demographic drag, the growing debt load, maybe even a political collapse. I won’t rule these out, but I don’t think they are likely to break China’s humming tech engine. Demographics in particular don’t matter for advanced technology — you don’t need a workforce of many millions to have robust production of semiconductors or EVs. South Korea, for example, has one of the world’s fastest shrinking populations while retaining its success in electronics production. And though China suffers broader economic headwinds, technology firms like Xiaomi continue to develop new products and enjoy rising revenues. Technology breakthroughs can occur even in a suffering society. Especially if the state continues to lavish resources on chips or anything that could represent an American chokepoint.
Second, western elites keep citing the wrong reasons for China’s success. When members of Congress get around to acknowledging China’s tech advancements, they do not fail to attribute causes to either industrial subsidies (also known as cheating) or IP theft (that is, stealing). These are legitimate claims, but China’s advantages extend far beyond them. That’s the creation of deep infrastructure as well as extensive industrial ecosystems that I describe above.
Probably the most underrated part of the Chinese system is the ferocity of market competition. It’s excusable not to see that, given that the party espouses so much Marxism. I would argue that China embodies both greater capitalist competition and greater capitalist excess than America does today. Part of the reason that China’s stock market trends sideways is that everyone’s profits are competed away. Big Tech might enjoy the monopolistic success smiled upon by Peter Thiel, coming almost to genteel agreements not to tread too hard upon each other’s business lines. Chinese firms have to fight it out in a rough-and-tumble environment, expanding all the time into each other’s core businesses, taking Jeff “your margin is my opportunity” Bezos with seriousness.
Third, western elites keep holding on to a distinction between “innovation,” which is mostly the remit of the west, and “scaling,” which they accept that China can do. I want to dissolve that distinction. Chinese workers innovate every day on the factory floor. By being the site of production, they have a keen sense of how to make technical improvements all the time. American scientists may be world leaders in dreaming up new ideas. But American manufacturers have been poor at building industries around these ideas. The history books point out that Bell Labs invented the first solar cell in 1957; today, the lab no longer exists while the solar industry moved to Germany and then to China. While Chinese universities have grown more capable at producing new ideas, it’s not clear that the American manufacturing base has grown stronger at commercializing new inventions…
Eminently worth reading in full: “2025 letter.”
Pair with “U.S.-China Economic Competition” (from Rand) and “The Outlook for China-US Strategic Competition in 2026” (an interview with Sarah M. Beran in The Diplomat)
* Lao Tzu
###
As we grapple with geoeconomics and geopolitics, we might remind ourselves just how fast China’s rise has been: on this date in 1967, in the midst of the Cultural Revolution, the Shanghai People’s Commune was established following the seizure of power from local city officials by revolutionaries. Shenzen was, at the time, a sleepy backwater, just off what was then the British colony of Hong Kong.
“False confidence often leads to disaster”*…
In 1957, in the depths of the Cold War, Russia launched Sputnik 1, the first artificial Earth satellite– a success that surprised the U.S., which had rested comfortably on an assumption of technical superiority. Shaken, the nation responded with the Space Program and a broad array of flanking initiatives aimed at reinviograting education and innovation in the U.S.
Now it’s 2025, and America’s rivalry is with China. But in sharp contrast to the U.S. response to “the Sputnik moment,” America seems to be intent on a belligerent nationalism, rooted in a self-satisfied sense of superiority, that is only too happy to sacrifice the very things that could keep us in the global game– e.g., education and science domestically; the soft power that accrues to a good neighbor globally.
Kaiser Kuo, an astute observer of the situation, weighs in with a provocative warning…
The world feels unsettled, as if history itself were changing tempo. The familiar landmarks of the modern age are blurring, slipping away, and the stories we once told ourselves about progress and power no longer map cleanly onto the terrain before us. What we are living through seems, with each new day, less like a passing rearrangement of power, less like a momentary realignment of nations. We sense something deeper and more enduring: a transformation whose outlines we are only beginning to discern. History no longer feels like something unfolding behind us but something rushing toward us, urgent and impossible to ignore.
The economic historian Adam Tooze, reflecting on his recent, intense engagement with China, put it to me in July with characteristic directness: “China isn’t just an analytical problem,” he said. It is “the master key to understanding modernity.” Tooze called China “the biggest laboratory of organized modernizations there has ever been or ever will be at this level [of] organization.” It is a place where the industrial histories of the West now read like prefaces to something larger.
His observation cuts to the heart of what makes this moment so difficult to process. We have witnessed not merely the rise of another great power, but a fundamental challenge to assumptions long embedded in Western thought—about development, political systems, and civilizational achievement itself. We simply haven’t yet found the intellectual courage to face it.
This reckoning touches all of humanity, but it falls especially hard on the developed world and hardest on the United States, where assumptions about exceptionalism and hierarchy are most exposed and most fiercely denied. The familiar framing of China as “rising” or “catching up” no longer holds. China is now shaping the trajectory of development, setting the pace economically, technologically, and institutionally. For Americans especially, the deeper psychic shock lies in the recognition that modernity is no longer something they authored and others merely inherit. That story has outlived its usefulness.
The denial, the deflection, and the anxious overreaction so often seen in Western discourse are symptoms of that dislocation. Yet the reluctance to acknowledge this shift extends beyond governments, media narratives, or expert consensus. It includes people who’ve spent years thinking about these issues. I have been as susceptible as anyone—tempering big claims, second-guessing implications, staying in safer territory even when the evidence has been pointing in this direction for some time. There’s always a “but” when it comes to recognizing China’s accomplishments, a reflex to tick off the costs and enumerate the failings, to pull back just when the scale of transformation becomes clear.
The greater risk, I now believe, lies in saying too little.
This essay doesn’t rehearse the familiar bill of particulars on China—constraints on political pluralism and independent media; expansive security powers and preemptive detention; pressure on religious and ethnic expression; and episodes of extraterritorial coercion—not because those concerns are trivial, but because the task here is different. We’ve all learned to recite that litany, as a way of protecting ourselves from what real comparison might imply. The aim here is to confront, with intellectual honesty, what China’s achievements oblige us to reconsider about modernity, state capacity, forms of political legitimacy, and our own complacencies. Recognizing real costs can coexist with taking the magnitude of transformation seriously. This argument asks us to face squarely what has been accomplished and then measure ourselves against it.
And let me be clear: This reckoning is not a surrender. It is not an argument for abandoning liberal values, declaring authoritarian systems superior, or slavishly imitating features of China’s governance. It is instead a call for the kind of frank, sober assessment that genuine confidence requires—the willingness to acknowledge challenges directly, to learn from others’ successes even when they unsettle our assumptions, and to strengthen our own institutions through clear-eyed recognition of their shortcomings rather than defensive denial of their failures. Liberal democracy is indeed undergoing a profound crisis, but that crisis need not be terminal. The question is whether we will meet it with the rigorous self-examination that has historically enabled democratic renewal, or retreat once more into the comforting myths that have blinded us to both our weaknesses and our rivals’ strengths…
What the West should learn from China: “The Great Reckoning,” @kaiserkuo.bsky.social in The Ideas Letter. Eminently worth reading in full.
Pair with: “China Has Overtaken America,” @pkrugman.bsky.social and “China has copied America’s grab for semiconductor power.,” from @himself.bsky.social.
* Aesop
###
As we rethink, we might send birthday greetings to a character in a cautionary tale from history, Zhu Yuanzhang, the founding emperor (The Hongwu Emperor) of the Ming dynasty, who reigned from 1368 to 1398. Under Zhu, China was the world’s largest economy and had it’s leading navy, projecting power and enabling trade beyond Asia.
But in the mid 15th century, all of this changed:
… shifting political priorities, and rising Confucian skepticism toward maritime commerce, the Ming government ordered an end to all foreign voyages. Shipbuilding for large vessels was banned, and Chinese citizens were forbidden from traveling overseas. This self-imposed isolation would have profound consequences. While Europe was entering its Age of Exploration, building colonies and global trade networks, China had turned inward, forfeiting its naval advantage and potential leadership in global affairs… – source (more, here)
You must be logged in to post a comment.