The Slow Chess Game for Hegemony

It’s been fun watching the Chinese leadership trying to manage their “peaceful rise” (their current rubric) in relationship to the global economic crisis. They have clearly opted out of bilateral deals to invest in European debt, recognizing that they were to be the designated bagholders of Round 2 as the petro states were for Round 1, and have stated their preference instead to do things through the IMF with SDR bonds of some kind. I had assumed that this was because they would seek terms so that any drop in value of purchased european bonds (which seems inevitable whether or not the ECB prints — one path via drops in nominal asset value, the other via currency depreciation against the yuan) would then allow them to increase their stake of SDR’s in compensation and voila, Europe’s disproportionate share of IMF votes would be downgraded, and — an even more prized target— the US veto would get diluted away to the vanishing point. Peacefully transforming the IMF into an instrument responsive to the needs of the Chinese state would be a neat historical trick.

However, Reuters has a piece entitled:  Politics stymie China’s EU aid offer.  Based on the latest leaks, it turns out that the Western powers have no intention of allowing the Chinese to exercise any of these usual capitalistic kinds options in the event of bad outcomes. They really do seem to be insisting that Asian savings be used to prop up the West without giving up any control. Surprise, surprise!

It turns out that the bad old imperial habits of thought of the post-war Washington Consensus haven’t really gone away, despite the financial crisis and the obvious changing balance of power; this suggests that a peaceful path to flipping hegemony in the global system will not be easily found and that we are all somewhat dependent on the wisdom, maturity and forbearance of the Chinese leadership for avoiding World War III.  God help us all if it becomes stubbornly impossible.

Japan as a US protectorate is more susceptible to pressure, and yesterday’s performance by Christine Lagarde there seems to be part of a tactic of hostage-taking (though not without a truthful logic) “If you don’t help us out, we might take the whole system down”. Ironic, since Lagarde campaigned for her current position on the basis of increasing the voice of the developing world. But raw power is nothing if it is not ironic.

The question for progressive thinkers about global order: Can we reconstruct a vision, fractured so badly in August 1914, of an international system without hegemony? Is it possible even to imagine it in a world of nation states? Or do we require an aufhebung of the Westphalian system?

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