US, India, China

15 June 2009

Sathyam Commentary
Selected Writings by Nadesan Satyendra – நடேசன் சத்தியேந்திரா
from the website TamilNation.org


US – India – China: Changing Dynamics
& an Emerging Bi-Polar World ?

(a 10 Minute Read)

by Nadesan Satyendra

23 February 2009

“our [US] relationship with China will be the most important bilateral relationship in the world in this century… We believe that the United States and China can benefit from and contribute to each other’s successes. It is in our interests to work harder to build on areas of common concern and shared opportunities” – US Secretary of State Hillary Clinton

In 1983, I stumbled into a lecture on International Relations at Cambridge University. The lecture was by a visiting German Professor. I forget her name. But something that she said has remained with me over the past several years. She said:
‘History shows that a bi polar world will eventually become a uni polar world. Then the uni polar world will give way to a multi polar world. Out of the multipolar world will come a new bi polar world. And then that bipolar world will give way to another unipolar world and so on’.

Ofcourse at the time she spoke in 1983, we lived in a bi polar world with the US and the Soviet Union as the two super powers. Other countries, whether they regarded themselves ‘non aligned’ or not, leaned for support on one or the other of the two super powers to a lesser or greater extent.

With the collapse of the Soviet Union in 1991, we saw the emergence of an uni polar world with the US as the world’s sole super power. The Project for the New American Century, 2000 articulated the vision of that unipolar world where the US would reign supreme –

“…American land power is the essential link in the chain that translates U.S. military supremacy into American geopolitical pre eminence… In Southeast Asia, American forces are too sparse to address rising security requirements adequately… No U.S. strategy can constrain a Chinese challenge to American regional leadership if our security guarantees to Southeast Asia are intermittent and U.S. military presence a periodic affair.

For this reason, an increased naval presence in Southeast Asia, while necessary, will not be sufficient.. For operational as well as political reasons, stationing rapidly mobile U.S. ground and air forces in the region will be required…

..Since today’s peace is the unique product of American pre eminence, a failure to preserve that pre eminence allows others an opportunity to shape the world in ways antithetical to American interests and principles…Global leadership is not something exercised at our leisure, when the mood strikes us or when our core national security interests are directly threatened; then it is already too late. Rather, it is a choice whether or not to maintain American military pre eminence, to secure American geopolitical leadership, and to preserve the American peace…”

President George W. Bush, assuming office in 2001, pushed forward US supremacist policies directed to secure, permanently, American military pre eminence and American geopolitical leadership –

“The grand strategy developed by the Bush administration extends beyond the war on terrorism to a radical reassessment of US foreign and military policy in this unipolar world. As high US officials explain, the United States is intent on pursuing policies that prevent the rise of a “peer competitor.” Tossing aside the traditional “realist” approach to US security affairs, President Bush outlined a supremacist or neo-imperial agenda of international security in a key foreign policy speech at West Point in June 2002. Not only would the United States no longer count on coalitions of great powers to guarantee collective security, it also would prevent the rise of any potential global rival—keeping US “military strengths beyond challenges.” The US Power Complex: What’s New – Tom Barry, November 2002

But the limits of US power were soon exposed by the events of 9/11, the Afghan War as well as by the adventure in Iraq –

“… The global crisis of overproduction is showing up the underlying weakness of the US real economy, as a result of which US trade and budget deficits are galloping. The euro now poses a credible alternative to the status of the dollar as the global reserve currency, threatening the US’s crucial ability to fund its deficits by soaking up the world’s savings. The US anticipates that the capture of Iraq, and whatever else it has in store for the region, will directly benefit its corporations (oil, arms, engineering, financial) even as it shuts out the corporations from other imperialist countries. Further, it intends to prevent the bulk of petroleum trade being conducted in euros, and thus maintain the dollar’s supremacy….” The Invasion of Iraq: Oil & the Euro – Aspects of India’s Economy – December 2002

In the years following the Iraq adventure, the unipolar moment of US supremacy passed. Timothy Garton Ash, Professor of European Studies, University of Oxford wrote in 2007, –

“…Power is no longer what it was, nor where it was. (Concentrated in the west, that is, and especially in the West Wing of the White House). It is more diffused both vertically and horizontally. Vertically, in the sense that relatively less power resides with the governments of states. Horizontally, in the sense that power is more widely distributed between a number of powerful states. Increasingly, the power map is both multilevel and multipolar.”

Today, the global economic crisis has brought about another sea change. It has served to bring into sharp focus the dependence of the US (a debtor country) on foreign (read China) savings. Strange bedfellows it may seem to some – but it is true. The US with an average income of around 40,000$ is a debtor country whilst China with an average income of 2000$ is a creditor country. During the past decade or so China has in effect financed the US credit boom.

“..We are living through a challenge to a phenomenon Moritz Schularick and I have christened “Chimerica.” (China-America). In this view, the most important thing to understand about the world economy over the past decade has been the relationship between China and America. If you think of it as one economy called Chimerica, that relationship accounts for around 13 percent of the world’s land surface, a quarter of its population, about a third of its gross domestic product, and somewhere over half of the global economic growth of the past six years.

For a time, it was a symbiotic relationship that seemed like a marriage made in heaven. Put simply, one half did the saving, the other half the spending. Comparing net national savings as a proportion of Gross National Income, American savings declined from above 5 percent in the mid 1990s to virtually zero by 2005, while Chinese savings surged from below 30 percent to nearly 45 percent. This divergence in saving patterns allowed a tremendous explosion of debt in the United States, for one effect of the Asian “savings glut” was to make it much cheaper for households to borrow money than would otherwise have been the case. Meanwhile, low-cost Chinese labor helped hold down inflation.

The crucial mechanism that bound the two halves of Chimerica together was currency intervention. To keep the renminbi (and hence Chinese exports) competitive, authorities in Beijing consistently intervened to halt the appreciation of their own currency against the dollar. The result was a vast accumulation of dollar-denominated securities in the reserves of the People’s Bank of China, which became one of the world’s biggest holders of U.S. Treasuries as well as bonds issued by the government-sponsored (now government-owned) agencies Fannie Mae and Freddie Mac. Had it not been for the Chinese willingness to fund America’s borrowing habit this way, interest rates in the United States would have been substantially higher. It was Chimerica that kept the Age of Leverage going in its final phase, as total public and private debt as a percentage of GDP surged from 250 to 350 percent…” What “Chimerica” Hath Wrought – Niall Ferguson, Laurence A. Tisch Professor at Harvard University, 2009

And it appears that just as the beginning of the end of the ‘uni polar moment’ was signalled with the Iraq war in 2002, we are today, witnessing the beginning of the end of the ‘multi polar moment’ as well. The global economic crisis has set the stage for an emerging bi polar world.

It is this which led Senator Hillary Clinton to conclude in 2008 that “our [US] relationship with China will be the most important bilateral relationship in the world in this century” and for Secretary of State Hillary Clinton to say last week –

“We believe that the United States and China can benefit from and contribute to each other’s successes. It is in our interests to work harder to build on areas of common concern and shared opportunities”. US Secretary of State Hillary Clinton, Asia Society, New York, 13 February 2009

Indian career diplomat M K Bhadrakumar was right to point out some of the effects of this paradigm shift in India Grapples with the Obama Era, February 2009 –

“… a pall of gloom has descended on New Delhi’s elite. There is a pervasive nostalgia for George W Bush. The Bush administration officials claimed that the US regarded India as the preponderant power in South Asia and as a key Asian player that would shape up to be a viable counterweight to China militarily… Obama’s China policy renders obsolete the Indian strategic calculus built around the US containment strategy. Hardly two to three years ago, the Bush administration encouraged India to put faith in a quadrilateral alliance of Asian democracies – the US, Japan, Australia and India – that would strive to set the rules for China’s behavior in the region.

According to reports, State Department officials had originally proposed that India be included in the itinerary of Clinton’s current first official tour abroad, but she struck it out. As things stand, Clinton meant every word of what she wrote last year in her Foreign Affairs article that “our [US] relationship with China will be the most important bilateral relationship in the world in this century”.

In a major speech at the Asia Society in New York last Friday before embarking on her tour of Asia, Clinton said, “We believe that the United States and China can benefit from and contribute to each other’s successes. It is in our interests to work harder to build on areas of common concern and shared opportunities”. She argued for a “comprehensive dialogue” and a “broader agenda” with China…

The US needs to have new opportunities to export more to China; it should persuade Beijing to accept a realistic dollar-yuan exchange rate; and, it should convince China to keep investing its money in America. But what is unfolding is also a phenomenal story insofar as a new chapter in their mutually dependent relationship is commencing where the two countries become equal partners in crisis. This was simply unthinkable.

Dennis Blair, the newly appointed director of national intelligence, in his testimony before the US senate intelligence committee on January 22, struck a fine balance when he said, While the United States must understand China’s military buildup – its extent, its technological sophistication and its vulnerabilities – in order to offset it, the intelligence community also needs to support policymakers who are looking for opportunities to work with Chinese leaders who believe that Asia is big enough for both of us and can be an Asia in which both countries can benefit as well as contribute to the common good. However, this is precisely where a serious problem arises for India. In the Indian perception, South Asia and the Indian Ocean just aren’t “big enough” for India and China.”

In the Indian perception, South Asia and the Indian Ocean just aren’t ‘big enough’ for India and China. But India may be compelled to change this world view and Indian Foreign Minister Pranab Mukherjee may need to reconsider the remarks that he made in October 2008 (with the Bush administration in place) –

“We have a very comprehensive relationship with Sri Lanka. In our anxiety to protect the civilians, we should not forget the strategic importance of this island to India’s interests,… especially in view of attempts by countries like Pakistan and China to gain a strategic foothold in the island nation…Colombo had been told that India would “look after your security requirements, provided you do not look around”. “We cannot have a playground of international players in our backyard.”

New Delhi may want to recognise that given the emerging bi polar world, and given the strategic significance of the Indian Ocean region to both the US and China, New Delhi may be powerless to prevent ‘countries like Pakistan and China gaining a strategic foothold in the island nation’. Again, it may be that this was the case with the Bush administration as well, but with the difference that New Delhi was persuaded that the Bush administration was ‘building India’s military capacity in order to counter potential rivals China and Russia in the region’.

“..In the background of the Indo-US nuclear deal now going into ‘overdrive’, as well as the increasing economic co-operation and (most importantly) the joint military exercises and interoperability efforts and acquisitions made by India, there is a geopolitical notion: that the US is building India’s military capacity in order to counter potential rivals China and Russia in the region… (But) Empires don’t build great powers. They build clients and dependencies…” Empires Don’t Build Rivals – Justin Podur , 5 August 2008

Again, even if India’s Sonia Gandhi-Manmohan Singh administration is content to play the US client role, this may not have the support of large segments of the Indian polity – more so in an election year. Given an emerging bi polar world, India may go back to its old ‘non aligned’ foreign policy approach and at the same time strengthen its links with its old friend, Russia. It is an approach that will have the support of the Communist Party of India.

And in relation to the conflict in the island of Sri Lanka, the old adage that countries have permanent interests but do not have permanent friends may persuade New Delhi to change course and also recognise the significance of something that Dr. M. S. S. Pandian, Visiting Fellow of the Sarai Programme, Centre for the Study of Developing Societies, Delhi said in October 2008 –

“Tamil Nadu had a history of demanding secession from the Indian Union. Yet, over time, it has chosen to integrate itself fully with the national mainstream. If New Delhi does not change course in its Sri Lankan policy, it may plant the seeds towards a reversal of such history. That will be India’s misfortune”.

New Delhi will want to recognise that despite its best efforts it cannot prevent the continued presence of US and China in Sinhala Sri Lanka (in what New Delhi regards as its backyard) and that India’s strategic interests in an emerging bi polar world may be best served by the creation of an independent Tamil Eelam rather than by preventing its formation. Steadfastly defending the inviolability of territorial boundaries of existing states, regardless of how and when they were determined may not be the path to a stable world order. There is a need to defend the very real values that a people stand for and speak from the heart to the hearts of those people.

A people’s struggle for freedom is also a nuclear energy and India may need to adopt a more ‘principle centred’ approach towards struggles for self determination in the Indian region. A myopic approach, apart from anything else, may well encourage the very outside ‘pressures’ which New Delhi seeks to exclude.

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