Satellite photo of probable headquarters island of Fiery Cross Reef in the Spratly archipelago in the South China Sea. Formerly an uninhabited rock outcropping in what most considered international waters, it is now a Chinese military base, after a massive reclamation and construction campaign undertaken by China’s president, Xi Jinping. In this image taken on January 2, 2016, one can see the airstrip, and also a Chinese amphibious transport warship in the Fiery Cross anchorage. Image courtesy Jane’s and Airbus, © CNES 2016, Distribution Airbus DS/© 2016 IHS.

Not your grandparents’ Cold War: Why America should emphasize economic rather than military strategies in its rivalry with China

By Joseph Tavares, Kori Schake, November 9, 2022

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Satellite photo of probable headquarters island of Fiery Cross Reef in the Spratly archipelago in the South China Sea. Formerly an uninhabited rock outcropping in what most considered international waters, it is now a Chinese military base, after a massive reclamation and construction campaign undertaken by China’s president, Xi Jinping. In this image taken on January 2, 2016, one can see the airstrip, and also a Chinese amphibious transport warship in the Fiery Cross anchorage. Image courtesy Jane’s and Airbus, © CNES 2016, Distribution Airbus DS/© 2016 IHS.

Scholars and policy makers often analyze the past as a means of understanding present circumstances and devising policy responses. This is, of course, a perfectly rational and prudent way to interpret current events. It is no surprise, then, that the US-China competition of 2022 has drawn comparisons to the Cold War contest between the United States and the Soviet Union. In both cases, two countries in different regions of the world, with incompatible political and economic systems and powerful militaries, compete to increase their power and influence. Yet analogizing the situations too much can actually impede the US effort to devise policies to counteract China’s rise because lessons from the Cold War may be misapplied. This risk is exacerbated by three crucial differences in these great-power contests: Today’s China is more economically powerful than the Soviet Union was; the American and Chinese economies are more intertwined now than the United States’ and Soviet Union’s ever were; and US allies today are wealthier and more militarily capable than during the Cold War.

Because of these differences, the United States should approach its rivalry with China in a way that emphasizes economics and focuses less on the types of ideological and military struggles that characterized the Cold War.

Not your grandparents’ Cold War

Starting with the differences between today’s US-China competition and the Cold War prevents one from over-emphasizing similarities.

First, the Chinese economy is far more robust than the Soviet Union’s was. When the Bolshevik revolution occurred in 1917, the Russian economy was heavily dependent on agriculture. The Soviet Union achieved significant economic growth from 1928 to about 1970 because it rapidly acquired capital and shifted labor from the agricultural sector to industrial jobs (Allen 2001a). However, Moscow was unable to maintain this economic growth because the Soviet Union failed to create high-productivity jobs (Allen 2001b). That this transition never occurred stemmed in part from the increasing difficulties the Kremlin faced in developing or importing technological advancements (Trachtenberg 2018).

The Chinese path to economic growth was similar to that of the Soviet Union—initially. China was, and in some parts still is, heavily agrarian. In 1978, under the rule of Deng Xiaoping, Beijing began to reform its economy by encouraging private enterprise, liberalizing trade and investment, and investing in industrial production (Hu and Khan 1997). Through these long-term efforts, China has been able to maintain vastly greater levels of productivity growth than the Soviet Union (Black and Morrison 2019; and Trachtenberg 2018). The more powerful Chinese economy means that China will be better equipped to withstand the stresses of prolonged geopolitical competition.

Anti-communist poster for 1953 federal elections in Germany: “All ways of Marxism lead to Moscow! Therefore CDU.” Image courtesy of Wikimedia Commons/Konrad-Adenauer-Stiftung. CC BY-SA 3.0 de

The second key distinction between this century’s US-China competition and last century’s Cold War is that the American economy is more intertwined with China than it was with the Soviet Union. The United States imports more goods and services from China than any other country (US International Trade Data 2021). And apart from Canada and Mexico, no country receives more US exports than China (US International Trade Data 2021). Beyond this, many American companies have manufacturing sites or partner entities located in China, or at least significant economic interests there due to China’s large population and growing middle class. During the Cold War, the United States and the Soviet Union were much more economically separate, due primarily to Moscow’s interest in relying less on Western countries and more on Warsaw Pact allies for trade. The greater integration between the American and Chinese economies means that economic actions directed against either country will also precipitate great economic damage to the initiating country.

The final significant difference is that contemporary US allies are more economically advanced and militarily capable than American allies during the early years of the Cold War—especially its early years. After World War II, the countries that would eventually form the NATO alliance—such as Britain, France, and West Germany—lay in ruins. Many cities, especially on the European continent, had been devastated; factories had been destroyed by strategic bombing campaigns; and citizens were exhausted from the war’s physical, mental, and emotional demands. The damage was so extensive that the Truman administration proposed and Congress approved economic aid to Europe in the Marshall Plan (ultimately totaling $13.3 billion, equivalent to approximately $150 billion in 2022 dollars (CPI Inflation Calculator, accessed 2022; National Archives 2022a). If the Soviet Union had decided to overrun the Fulda Gap or expand elsewhere in Europe, US allies would not have been well-positioned to stave off the Soviet advance without the United States bearing nearly all the burden. A key task of the Cold War, therefore, was to strengthen US allies and enable them to account for a greater share of their security.

In the US-China competition, countries like Britain, France, and Germany are significant economic and geopolitical players. In Asia, South Korea, Japan, and Australia are all advanced economies building up their militaries with indigenously developed platforms and in partnership with foreign defense companies. Of the top 10 largest economies by nominal gross domestic product, seven are US allies (Ford and Goldgeier 2021). The NATO countries, together with Japan, Australia, and South Korea, account for approximately 60 percent of global military spending (Ford and Goldgeier 2021). And allied militaries are interoperable (US Navy 2022). While the United States still seeks to strengthen its allies and partners as in the Cold War, there is less work to be done in 2022 than in 1952.

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Historical similarities worth noting

Although the US-China competition differs from the Cold War in substantive ways, there are also similarities worth highlighting. First, both competitions entail a struggle between opposing systems of political and economic organization. In the Cold War, the democratic capitalist United States and its allies faced the authoritarian communist Soviet Union and other Warsaw Pact nations. In a speech to a joint session of Congress on March 12, 1947, President Harry Truman asserted that “it must be the policy of the United States to support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures” (National Archives 2022b). The Soviets saw capitalism as a rapacious system that subjugated the working class and sought to underscore the benefits of their system. While speaking to the Soviet Party Congress in February 1946, Joseph Stalin declared that World War II was the result of capitalism itself and that the war proved the saliency of the Soviet system despite its detractors (Stalin 1946). Most famously, Ronald Reagan described the Soviet Union as an “evil empire” (Reagan 1983), which prompted the Soviet Press Agency to rejoin that the administration could “think only in terms of confrontation and bellicose, lunatic anti-Communism” (Schmemann 1983).

anti-communism comic book
Cover page of 1947 anti-communist propaganda comic book “Is this tomorrow.” Public domain image/Wikimedia Commons.

Today’s US-China competition bears a similar ideological component. Like the Soviet Union, China’s Communist Party (CCP) has established an autocratic system that exercises significant control over its citizens and limits political and economic freedom. Through its use of modern technology, the CCP has been particularly adroit at surveilling its people and enforcing strict laws to suppress dissent. And repression has intensified in recent years as the CCP tightens control in state bureaucracy, media, online speech, religion, universities, businesses, and civil society—even using the COVID-19 pandemic as justification for greater control (Freedom House, accessed 2022). As in the Cold War, both the United States and China seek to cast the competition in ideological terms. In a speech to the US Naval Academy’s graduating class of 2022, President Joe Biden framed it as “a global struggle between autocracies and democracies” (Fung 2022). The United States condemns Chinese actions such as its treatment of its minority Uyghur population and sanctions Chinese defense companies. Conversely, the CCP openly supports the Myanmar Junta and Russia in Moscow’s war with Ukraine (Kurlantzick 2022).

Not only do both the Cold War and the US-China competition of today pit opposing ideologies against each other, but in each conflict both ideologies have also claimed universality. The United States holds these truths to be self-evident: that all men are created equal and are endowed with unalienable rights. Though we often fail to uphold those rights, they are our lighthouse. As President John F. Kennedy poignantly stated in his address to the nation regarding the Soviet Union’s presence in Cuba, “Our goal is not the victory of might, but the vindication of right—not peace at the expense of freedom, but both peace and freedom, here in this Hemisphere, and, we hope, around the world” (Kennedy 1962). President Biden framed his fundamental approach to diplomacy by stating that the United States must “start with diplomacy rooted in America’s most cherished democratic values: defending freedom, championing opportunity, upholding universal rights, respecting the rule of law, and treating every person with dignity” (Biden 2021).

The Soviet Union also believed its ideology was universal: Marxism holds that class differences will, in the end, supersede ethnic or national differences. Vladimir Lenin argued that “[t]he bourgeoisie always places its national demands in the forefront, and does so in categorical fashion. With the proletariat, however, these demands are subordinated to the interests of the class struggle” (Lenin 1914). The key task of the Marxist endeavor was to get the proletariat classes of different countries to work together.

The Chinese Communist Party also believes that its ideology should be exported abroad, but for different reasons. While the Soviet Union maintained that humans everywhere would be eager to throw off the shackles of capitalism and adopt a Soviet-like system, contemporary Chinese rulers have apparently concluded that many countries want to achieve Western levels of development without adopting Western ideas like democracy, human rights, or certain freedoms. In a speech to the 19th Party Congress in 2017, Chinese President Xi explained his belief that China “offers a new option for other countries and nations who want to speed up their development while preserving their independence” (Xi 2017). In Xi’s view, China’s success at modernizing and developing without democratizing is something that other countries should emulate. Just like the Soviet Union of the last century, the CCP works both to impose its ideas domestically and to promote, through varying degrees of coercion, its ideas abroad.

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The second similarity between the Cold War and the US-China competition is that there is a military component to each. In the Cold War, the US military played a key role to deter Communist expansion in Europe and, less successfully, in Asia. Even short of conflict or the positioning of forces to dissuade Soviet aggression, the buildup of US forces pressured the Soviets to invest heavily in their military at the expense of civilian expenditures such as technological or economic advancement (Allen 2001c). The Chinese military has improved dramatically in recent years. With goals to modernize by 2035 and be capable of winning wars by 2049, China has built the world’s largest navy and is dramatically expanding its nuclear arsenal (Brown 2022). But the US military is also undergoing strategy and resource shifts after focusing predominantly on counterterrorism in the Middle East and North Africa. Over the past decade, the US military’s focus on and resources devoted to the Indo-Pacific have grown. Describing China as the pacing threat, the US Defense Department has engaged in efforts such as the Pacific Deterrence Initiative to modernize and strengthen its regional presence (Office of the Under Secretary of Defense 2022).

Policy guidance, based on analysis and history

Given these Cold War parallels and differences, three principles should guide US policy toward China based on the previous analysis. First, counter-intuitively, the United States should not overemphasize ideology. The international order the United States advocates is voluntary and based on norms, whereas the Chinese model would be a coercive and hierarchical order—with Beijing on top. But we risk over-egging the ideological pudding. We need more partners, especially in Asia, than ideological alignment can provide. Not every country that desires autonomy from China would align with US values. Furthermore, many small and medium countries in the region are not confident enough in US success to frame the conflict in ideological terms that might overly antagonize China and jeopardize future relations with Beijing should the United States fail. Simply put, these countries do not want to join a crusade.

1971 Chinese propaganda poster
June 1971 Chinese propaganda poster, featuring Chinese president Mao Zedong (right) and Lin Biao (left), creator of the Little Red Book and the architect of the Mao cult. The poster says “Advance victoriously while following Chairman Mao’s revolutionary line.” Source: https://chineseposters.net/posters/ BG E13/622

Second, the United States shouldn’t over-militarize the problem in ways that minimize many of our strengths and competitive advantages. The Soviet Union did not dissolve because it surrendered after losing a war with the United States. The role of the US military is to ensure that China does not achieve its goals by force. This allows the United States to slowly but surely work to attract more nations to its vision for the Indo-Pacific region: one that is free, open, and prosperous (White House 2022). Relying too heavily on the military could alarm countries with much to lose in a US-China war, conjure up the specter of American imperialism, and deter other countries from more openly aligning themselves with the United States. US alliances and partnerships in the region are voluntary, not coercive, so the United States cannot choose a strategy that its allies oppose. Although this complicates the job of US diplomats, it means that allies will have already bought into the strategy and be much less likely to abandon it in crisis.

Finally, instead of focusing too much on ideology or over-militarizing the problem, US policy should re-center on economic issues. The United States needs an economic component to its strategy to help other countries rely less on China. Not only does this mean continually reinforcing the downsides of certain Chinese products, particularly in technology, but it also entails engaging with regional countries on trade. As our colleague Derek Scissors has argued, the United States should be working to establish high-standards bilateral trade agreements with countries like Japan, Taiwan, and the Philippines (Hoyama and Fang 2021).

Thus far, the Biden administration has not shown great interest in pursuing trade deals, believing they are detrimental to US workers. But we must increase integration with other advanced democracies and key developing states like India, which would mitigate the impact of China’s strategy of insulating itself from the West and dominating key technologies (Brands 2022). In critical technologies in particular, the United States and its allies must develop their own sources rather than rely on China, and prevent US and allied companies from inadvertently benefiting China’s efforts in these areas (Kitchen 2022). This would ensure that the United States and other nations can receive critical technologies and other goods without having to buy them from China.

Here, the late satirist P.J. O’Rourke’s comments on the end of the Cold War are instructive: “A huge totalitarian system with all its tanks and guns, gulag camps, and secret police has been brought to its knees because nobody wants to wear Bulgarian shoes” (O’Rourke 1992).

References

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Allen, R.C. 2001b. “The Rise and Decline of the Soviet Economy.” Canadian Journal of Economics 34 (4): 878-879. doi: 10.1111/0008-4085.00103.

Allen, R.C. 2001c. “The Rise and Decline of the Soviet Economy.” Canadian Journal of Economics 34 (4): 867-868. doi: 10.1111/0008-4085.00103.

Biden, J.R. 2021. “Remarks by President Biden on America’s Place in the World.” Speech, Washington, DC, February 4, 2021. The White House. https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/02/04/remarks-by-president-biden-on-americas-place-in-the-world/.

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