Overtaking the US in manufacturing doesn't make China a military superpower

At the Cold War's end, some pundits proclaimed that 'geo-economics' had replaced geopolitics. Economic power would become the key to success in world politics, a change that many people thought would usher in a world dominated by Japan and Germany.

Today, some interpret the rise in China's share of world output as signifying a fundamental shift in the balance of global power, but without considering military power. They argue that a dominant economic power soon becomes a dominant military power, forgetting that the US was the world's largest economy for 70 years before it became a military superpower .

Political observers have long debated whether economic or military power is more fundamental. The Marxist tradition casts economics as the underlying structure of power, and political institutions as a mere superstructure, an assumption shared by 19th-century liberals who believed that growing interdependence in trade and finance would make war obsolete.

But while Britain and Germany were each other's most significant trading partners in 1914, that did not prevent a conflagration that set back global economic integration for a half-century. Military power, which some call the ultimate form of power in world politics, requires a thriving economy. But whether economic or military resources produce more power in today's world depends on the context.

A carrot is more effective than a stick if you wish to lead a mule to water, but a gun may be more useful if your aim is to deprive an opponent of his mule. Many crucial issues, such as financial stability or climate change, simply are not amenable to military force. Today, China and the US are highly interdependent economically, but many analysts misunderstand the implications of this for power politics.

True, China could bring the US to its knees by threatening to sell its dollar holdings. But doing so would not only reduce the value of its reserves as the dollar weakened; it would also jeopardise US demand for Chinese imports, leading to job losses and instability in China. In other words, bringing the US to it knees might well mean that China would bring itself to its ankles.

Judging whether economic interdependence produces power requires looking at the balance of asymmetries. In this case, it resembles a 'balance of financial terror', analogous to the Cold War military interdependence in which the US and the Soviet Union each had the potential to destroy the other in a nuclear exchange. In February 2010, a group of senior Chinese military officers, angered over US arms sales to Taiwan, called for China's government to sell off US government bonds in retaliation. Their suggestion was not heeded.

Economic resources can produce soft-power behaviour as well as hard military power. A successful economic model not only finances the military resources needed for the exercise of hard power, but it can also attract others to emulate its example. The EU's soft power at the end of the Cold War, and that of China today, owes much to the success of the EU and Chinese economic models.

source-economic times
steven
management trainee-fundamental analysis
DENIP consultants Pvt Ltd