MADE with China

By Jason Lim

During the Cold War, the prevailing paradigm for global political stability was MAD, which stood for mutually assured destruction. It meant that neither side would dare to use nuclear weapons against another because it would invite an assured destruction for everyone.

This is what President Jimmy Carter said in 1980 in his Presidential Directive 59, laying out the principles behind MAD. Basically it would mean that the destruction for the aggressor would be so devastating, even with first strike, that war would not be a logical option for self-preservation. It worked.

Despite a few close calls like the Cuban Missile Crisis and countless low-level conflicts through third-world proxies ― including North and South Korea ― the U.S. and the Soviet Union never came close to a war.

We all know how the first Cold War ended. Since one of the underpinning foundation for MAD was a second strike capability, it led to a high-stakes arms race that eventually drove the Soviet Union to bankruptcy and left the U.S. as the only superpower standing.

According to pretty much everyone, we have now entered into the age of “G2,” in which the relationship between the U.S. and China will largely define the dynamics of global affairs. In fact, for some time, people have been almost giddily writing off the U.S. as the world’s dominant power.

Russian President Dmitry Medvedev called the 2008 financial crisis as a telltale sign that the era of American preeminence was coming to an end. Even Michael Ignatieff, the Canadian opposition leader, proposed that Canada should look beyond North America now that the “the noon hour of the United States and its global dominance are over.” Polls after polls of citizens of major countries around the world believe that China will soon surpass the U.S. in terms of influence and power.

So, is the era of a new Cold War between the U.S. and China dawning? Perhaps. No one can be sure. If not a Cold War, then we certainly will see an uptick in tension between the two countries in regions of conflict ― like Taiwan, North Korea, the South China Sea, etc. ― and areas of policy disagreements ― like currency manipulation, financial transparency, etc. Whatever term we coin, it’s almost certain that the world will be defined how these two giants play with each other in the years to come.

If MAD was the stabilizing force in the first Cold War, what is the stabilizing force in the upcoming second Cold War?

How about MADE, which stands for mutually assured destruction of the economy? It’s basically the same force and leverages the same great power dynamics to keep the peace. The only difference is that its focus is on the economy rather than military/politics.

MADE is possible because of the interconnectedness of the economies of China and the U.S. We buy Chinese-made goods and pay them in dollar, which China holds as a de facto loan to the U.S. China now has a foreign currency reserve of $2.5 trillion, much of it in U.S. Treasury securities.

Some are alarmed over the possibility of China dumping its dollar holdings to weaken the U.S. and increase its own relative influence in the global economy. This is possible. However, it would mean that the U.S. wouldn’t be able to buy Chinese-made goods, which would lead to job loss and instability in China. As Joseph S. Nye, a professor of Harvard University, said, “… if China were to bring the U.S. to its knees, it might bring itself to its ankles in the process.”

This should actually be the definition of MADE, which is all about mutually critical vulnerabilities reinforced by their current system of economic relationships. But what if political or military conflicts intrude and distort this MADE dynamics?

This is always possible, but not probable. Globalization has made economy the premier arbitrator of global power. It’s all about money and trade, not guns and steel when it comes to international affairs. Unless the U.S. decides to explicitly support Taiwan’s independence or North Korea decides to launch a nuclear-tipped ICBM toward Hawaii, the economic primacy in world affairs will be the framework for MADE viability for some time to come.

Some may argue that MADE is not the most stable of foundations to bet the future of world peace. I disagree. There is nothing more stable than the desire for self-preservation, as long as they are both holding a knife at each other’s throats.

Jason Lim is a Washington, D.C.-based consultant in organizational leadership, culture, and change management. He has been writing for The Korea Times since 2006. He can be reached at jasonlim@msn.com and on Facebook.com/jasonlim2000.