Expensive wars

The logic of financialization was ruining the US economy even as rapid industrialization – with massive support from American TNCs transferring industrial processes to China to take advantage of labor that was 2.9 percent the cost of US labor – was giving China’s economy a solid foundation and spurring its global expansion, as it supplied manufactured goods to the United States and other markets while its need for raw material and food stimulated the economies of the global South. Before the COVID-19 pandemic, in 2019, China had become not only the world’s second biggest economy. It had become the center of global capital accumulation or, in the popular image, the “locomotive of the world economy,” accounting for 28 percent of all growth worldwide in the five years from 2013 to 2018, more than twice the share of the United States, according to the International Monetary Fund.

One key reason China prospered was because of its low spending on defense during its decades of industrialization, a strategy that then-Chinese President Hu Jintao described as China’s “peaceful rise” in the early 2000s. Although the 2002 Defense Department Strategy Paper identified China as the main US strategic competitor, the Bush II administration’s desire to get China behind its war on terror as an ally post 9/11 allayed Beijing’s fears of US military power being directed at it.

Neither was China overly worried about US military power under Obama to push it to significantly raise military spending despite the vaunted “Pivot to Asia” of America’s strategic posture. Beijing knew that the United States was far too enmeshed with China as a production site for its TNCs, a market for American high technology, and a source of cheap manufactured goods for American consumers for Washington to carry out a disruptive military containment strategy.

The strategy of China’s “peaceful rise,” which relegates military upgrading far behind economic modernization as a priority, has continued to reign up until the Xi Jinping era, though more militant rhetoric now accompanies China’s responses to U.S. initiatives. Even now China has made little effort to close the spending gap with the Pentagon, with the latter devoting more than three times more than Beijing spends on defense. Reflecting this relatively relaxed view when it comes to military modernization, Xi told the Nineteenth Party Congress in 2017 that China will not have a “world class military” –meaning one that is at par with the United States–until 2049.

Instead of being preoccupied with building up its military might, Beijing has focused on opening markets in Africa and Latin America and becoming a source of billions of dollars of development aid, even as bilateral U.S. economic aid has been neglected in favor of ever increasing military assistance and subsidized weapons sales to old allies

Excerpted: 'The Trillion Dollar War: the Economics of Overextension'

Counterpunch.org