Economic Openness and Great Power Competition: Lessons for China and the United States

By David A. Lake (UC San Diego)

The US-China relationship is more likely than not to slide into economic and military competition, despite the perhaps best intentions of both states. This new bipolar competition is not inevitable. The key question is whether both governments have the self-restraint to limit domestic rent-seeking interests who will undoubtedly demand protection at home and exclusivity in their spheres of influence abroad. If not, the new superpowers will, like great powers in the past, “race” for economic privileges that can quickly divide the world up into exclusive blocs. Like the security dilemma, great powers need not actually exclude one another from their economic zones; the fear of exclusion alone is enough to ignite the process of division. There was always some likelihood of a competitive economic spiral given China’s close business-government relations in a “state-capitalist” economy. Now, for the first time in seven decades, there is a chance that the United States, in the grips of economic nationalism, might abandon its historic policy of free trade and ignite a new race for economic privilege as well.

Continue Reading…