TRANSITION REPORT
Number Three

The China Factor and the Overstretch of the US Hegemony

3 books that can change your mind in 2005 about the geo-politic and geo-economic dynamics going on

Interviews by Jorge Nascimento Rodrigues, editor of Gurusonline.tv, Jannuary 2005
Transition Report is a quarterly online journal edited by Gurusonline.tv

George Zhibin Gu, the Chinese consultant based in Shenzhen and author of the forthcoming "China's Global Reach" (Haworth Press, US)
Chalmers Johnson, president of the Japan Policy Research Institute and author of "The Sorrows of Empire" (Metropolitan Books, US)
André Gunder Frank, associate of the Luxembourg Institute for Education and International Studies and author of the forthcoming "ReOrient the Nineteenth Century" (a sequel of his 1998's "ReOrient")

FIRST STORY
A view from an insider
George Zhibin Gu
CHINA IS BECOMING A GLOBAL THEATER
"A new power balance will emerge gradually and most likely indirectly"

George Zhibin Gu considers himself a protagonist of the Chinese lucky young generation of the 60's in the last century. He heads a consulting group in Shenzhen that borders with Hong Kong. Born in 1961 in Xian - the most ancient capital of China -, Dr. Gu holds masters degrees in both physics and mathematics and a PhD in mathematics from the University of Michigan, in 1987, in the United States. For 13 years he lived in the US. He joined Wall Street in 1990, first in New York and then in San Francisco. He returned to China to represent Lazard and its clients in 1994. Later, he became independent with his own partnerships. He provides investment consulting, and more increasingly management consulting, for both multinational and Chinese companies. George Gu helps international companies to invest in China and Chinese companies to expand in the international market. Till now, he has done work in venture capital, M&A, joint ventures, business expansions and restructuring. He considers himself "a generalist with a focus on strategies". "My passion is coaching and public lecturing", he told Gurusonline. Dr. Gu is author of China Beyond Deng: Reform in the RPC (Mcfarland & Co Inc, 1991) and of the forthcoming book China's Global Reach: Markets, Multinationals and Globalization, to be published in Fall 2005 by Haworth Press, New York. In both books, that's a rigorous view from an INSIDER.

Dr. Gu can be contacted by email

INTERVIEW

First idea: "Today, most Chinese would prefer to be the one just following the leader. That is a safe play, and a better alternative"

The full engagement of China with the world means Daguo Xintai ( "mentality of global power") or Heping Jueqi ("peaceful rise" as Zheng Bijian introduced in 2003)? Has China a "mission" as a global power as the Portuguese, the Dutch, the British, and the US had in the past 650 years?

Strangely enough, the outside world feels more effects about this fast developing China. Most Chinese are more concerned to improve living standards and get more opportunities. They are little aware about China's future role in the global stage. More than often, the Chinese are shocked when foreign visitors tell them that 21 Century will be Chinese. Having this said, there is a common understanding that a fast developing China will reverse the history in this sense only: the Chinese will be treated as equals in the global community. For some 200 years, Chinese have been treated inferiorly. It is changing for the better, finally. China is not ready to play a more significant role in the global stage at all. Maybe it is because that China has suffered terribly in the past for thinking itself the center. Today, most Chinese would prefer to be the one just following the leader. That is a safe play, and a better alternative. Even the various European nations have learnt their lessons from the recent past. Being a world leader could also invite unwanted troubles. For that, the US has yet to learn.

The Asia Rising - more than the US twin deficits and the new terrorism - can be the main obstacle for the consolidation of the hegemonic role of the US? Do you think that, finally, the 21st century will be the truly "Asian Century"?

Asia could provide a global leadership in a different way. There are countless good merits in Asia. Asians have strong family ties, love education, and are willing to do hard work. Their best merit is this: they face tough situations with a smile and harder work. These are some of the merits for the rest of the world to learn. As Asians gain more economic progress, the rest of the world will become more willing to learn from Asians. This will reverse the recent historical trends. For this and only for this, 21 century will be Asian. To me, 21 century will belong to the world, not just Asia/China. For this century, sharing and common wealth will become more significant than ever before. As a result, more nations will benefit. This is a trend that can only grow. For the world is already tightly linked by business and economy. A car produced in Detroit has engine made in Europe and wheels made in Asia - with raw materials coming from Latin America and Australia. It takes a shared work and its benefits go beyond any single country. Also, at the next level, China and India's strength lies in the low cost structure. But the developed nations can easily tap into this market. They benefit more than anyone else. Also, for consumers in the developed nations, they can enjoy the cheapest products as well. So, 21 Century belongs to the entire world. It presents a grand platform for the convergence of global civilizations, though only in its very beginning. Even so, it shows a bright direction for the world, despite all the new worries and conflicts

Second idea: "Even if the US is not willing to be more open, it will be more aware of the others' existence. In short, a new power balance will emerge gradually, and most likely indirectly"

Can China emerge as a global challenger for the US hegemony? Or its emergence will be episodic like the Japanese short take-off as a global economic challenger in the 80's of last century?

The reemergence of both China and India today will impact on the global balance for sure. But it may come from a different context. That is, it may come gradually and indirectly. It is because that India and China take 40% of world population. If they double their income in the next ten years, the rest of world will feel it. Their enormous size means a lot already. How about the US hegemony? Well, the US will become more willing for consultations and dialogues with India, China and rest of world. Even if the US is not willing to be more open, it will be more aware of the others' existence. In short, a new power balance will emerge gradually, and most likely indirectly. More significant, it may not repeat the bloody rivalry as in the past. History shows that bloody rivalry may produce no winners. As far as the US is concerned, it is also learning as to how to act like a leader. There are no ready teachers for the leader. It makes more mistakes on its own weight. This weight may become too burdensome for it to handle. It has happened countless times in Man's History. Interestingly, the great powers in the past have all been pulled down more by their own weight than anything else. Should the future be any different?

Third idea: "China is being very careful not to let world politics mess its economic development. This will become a long-term strategy as well as a dominating mentality"

Is China able to grow, even if slowly, a sustainable coalition against the incumbent power, something that the new Russia never gets since the 80's? The strategic agreements with strategic countries all over the world (like those in 2004 - Brazil, Venezuela, South Africa, Iran, Golf Council) can change the world balance?

Economically, the world is more connected. But political rivalry is still intense. The political mentality must be changed to meet the changing realities. Otherwise, this cold war mentality will produce a mess for the world. China's growing economy will create more economic partnerships than anything else. China is being very careful not to let world politics mess its economic development. This will become a long-term strategy as well as a dominating mentality. China is also being very conscious about the international concerns. It now acts as an eager learner willingly. It shows that China has gone beyond the old mentality. That has made China's development a global thing as today.

Do you think China in this first half of the century can surpass the US in pure economic terms, as Goldman Sachs Reports are saying?

It is less meaningful to say that China will surpass US in any given time. However, China's growth is real and sustainable, despite all the imperfections. This conclusion is based more in the massive population size and their desires for a better life than in relation to their economic realities that still are very low. Many regions in China are only beginning to develop. It may be more meaningful to look at it this way - for example, if every five Chinese will use one more Kodak film role a year, China will double the size of US. In the mobile phone business, China is already more than twice the size of the US. But no, China will remain a low-income nation for a long time. A direct comparison may be less meaningful. Even so, China will enjoy a prosperous life if its income per capita reaches 20% of the US. Similar things may also be true for India and many other developing nations. Importantly, we have new lesson for the world: burdensome large population may be turned into a productive force if a fair and rational platform is created. In this context, both India and China are moving forward brilliantly.

China must enter in a G-something world big powers' club? Some think tanks proposed this year that China must enter a G4 with US, European Union, and Japan.

It is highly positive for the outside world to be more open. But let us not expect too much that memberships will get benefits. Even so, gaining access shows the increased international interest in a growing China. Walking out the old world mentality takes efforts for everyone.

Korea and Taiwan are real volatile issues for Chinese strategy, compromising the possibility for a "peaceful rising"?

For China, the Taiwan issue is most urgent. It is so complex, because it involves the US interest significantly. But it is more than a political issue. Economically, Taiwan is well connected to Mainland China. One highly feasible way is not to let the water boil too much and wait for the future generations for solutions. The only problem for now is that politicians on both sides are impatient somehow. It is made worse by the troublemakers in Washington. The Korea issue is easier. China is willing to play its part in finding a resolution. Even so, one should not expect a smooth sail for the Korea issue. It still poses a great challenge for the world.

The Chinese Diaspora (the Overseas Chinese) in South Asia (Singapore for instance) and all over the world (including Americas and Europe) is important for China globalization, as it is the Indian Diaspora (the so called "bollystan" by the Indian strategists)?

So far, overseas Chinese as a group are the biggest investor in China. Also, they add more values by playing a bridge role for China and the outside world. However, their power displays best by their vast numbers. They mostly focus on low-end businesses. For example, Hong Kong businessmen are the biggest investment group in China. But they focus on toys, clothes and household products mostly. Individually, the foreign multinationals are more influential in China as a group. They are the leader in IT, pharmaceutical, energy, auto and other capital-intensive businesses. Most Chinese professionals want to work for the multinationals. For now, more than 23 million Chinese work for the overseas employers.

Fourth Idea: "This hub is bound to expand in all directions. It is now being upgraded and moving toward R&D, financial and services. This process is unavoidable. Also, it may take less time than thought"

China will be the World Factory, the world-manufacturing center of the 21 Century? Or it can be more that that, also with a global positioning in off-shoring business processes and other services, including R&D and innovation?

So far, China has been able to build a manufacturing hub for the world. This hub has emerged in a natural, and even accidental, way other than by design. But it is reaching a rational level by now. This hub is bound to expand in all directions. It is now being upgraded and moving toward R&D, financial and services. This process is unavoidable. Also, it may take less time than thought. Things keep getting fed on their own merits. For this, international multinationals play a large role. So far, around 400 new sizable R&D centers are in operation that are all owned by foreign parties or joint ventures. The Chinese companies are also trying hard to move up in the value chain. For example, China's retail chain business is vibrant, though only about 10 years old. A better Chinese economy will have to come from innovation. Also, it is not restricted to technological issues. To me, it is more concerned with leadership, organizations and governance.

What you mean by that management revolution?

There is a huge room for innovation for all these things and beyond. Otherwise, R&D would not make business sense. In general, Chinese businesses are still weak in building professional organizations and effective management. Professional management is new to China. In the West, a CEO may work for five different companies in his career. In China, he can work only for one. It takes time to build modern professional organizations. Also, there is an overcrowd situation in every sector now. For example, China has some 400 air-conditioning makers and some 100 carmakers. They face deadly competition. To move ahead, there must be consolidations. But rational consolidations demand a more professional setup and management. Otherwise, M&A would not work. Now facing a deadly market competition, China is beginning to embrace merger activities. Indeed, if China's electronics and home-appliances makers, now counting about 1,300, are reduced to half dozen, these resulting companies will be the biggest in the world. This may take a couple of decades to materialize. The great thing is that China is fast moving, significantly due to the international involvement. The troublesome issues concern how to turn both the state sector and private sector companies into professional organizations before meaningful mergers can function right. There are no small issues when China is concerned. Turning China from a government-centered economy into a modern economy demands to create the entire package. It must have all the right components.

Can you give an example?

One large example is with the big four state banks. Despite an economic boom, they have been faltering up to now. There is an urgent way to clear up the banking house. But it is hardly a banking or business issue alone. It takes to reform the entire political-economic framework in place. In short, these four banks must be turned into independent professional organizations with a right ownership and governance as well as a professional management. In particular, it will have to serve the market needs other than government. Today, more actions are taken in this new direction. More is urgently needed.

You wrote that China is an "old man with baby clothes". The major obstacle to China growth is the bureaucratic power?

This uncontained bureaucratic power has been the ultimate and lasting problem for China. In my book, I state that this bureaucratic problem is like cancer and it has spread all over the body. To be sure, China's bureaucratic power has been expanding for 2,200 years, from Qin Dynasty to Mao era. This bureaucratic power has been able to contain all the private initiatives effectively and completely. China has always had a vibrant private sector, but it has failed to create a modern market economy and a true private ownership. Since 1978, China's bureaucratic power has been on the decline. It has directly given birth to the sharp rise of private sector. It is this private sector that is most responsible for a booming economy. What a contrast! This contrast is even more meaningful when considering that China has the same soil, land and people. But people are happier, more prosperous and more productive than in Mao era.

The pragmatic approach of the old Sun YatSen in the 1910's and of the late Deng XiaoPing in the 1970's is not sufficient for a path of political and social change?

Throughout the long search for a better nation in the past 200 years, China has not really had the opportunity to resolve the basic issues of this untamed bureaucratic power from the root-causes. Instead, there have been full of shortcuts. Socialism is nothing but a shortcut in China in the past half century (though many outsiders argue that China has not had a true socialism). Through this socialist slogan, the government power has been expanded into the lowest grassroots levels. The society and people have been deeply trapped for long. China's economy went dead. But the government bureaucrats have benefited greatly. Their power has expanded in all possible ways, and eventually reached the household level. No citizens were left independent, not even monks. This never happened before in China's entire history. In particular, each old dynastic government had a small official body. One hundred years ago, the government had only some 20,000 officials administrating over this vast nation of 400 million at the time. But since 1949, this bureaucratic body has grown to mount to several millions. Yet, in Mao era, China encountered the biggest manmade tragedies with the people's commune, Great Leap Forward, and Cultural Revolution. Even today, it is still the highest, as well as most formidable, goal for China to contain the bureaucratic power.

Fifth idea: "Chinese businesses have tiny profits made at home. Instead, they must seek active partnerships with the outside world. China is to become the dumping ground for low value added business. This new type of strategic alliances will become more popular"

The IBM-Lenovo agreement is a signal of a new Era for Chinese multinationals? Is this a different path from the Japanese strategy of the 1980's that you reported so clearly in the interesting "theatre" dialogue in some chapters of your book?

Chinese companies have gained enormous progress, especially in manufacturing. But they have gained limited progress with brands, intellectual property and distribution network, especially in the outside world. Moreover, their profits are tiny due to intense competitions and low value added manufacturing business. As a result, there is no way for the Chinese to follow the Japanese model for the international expansion. Japanese businesses made healthy profits at home before they went out. But the Chinese businesses have tiny profits made at home. Instead, they must seek active partnerships with the outside world. This is a realistic way for the Chinese. Good progress is also visible in this context. For example, TCL has joint ventures with Thomson and Alcatel on TV, DVD and mobile phones. Now there is the high-profile deal for IBM-Lenovo. Why did IBM do it? It not only dumps a low profit business, but also gains a growing partner that is beginning to tap into the outside world. Also, through partnership, IBM hopes to cross sell more products to China. For Lenovo, it is a dream coming true. Upon it, it is a global player. This could become a trend. That is, China is to become the dumping ground for low value business. This new type of strategic alliances will become more popular. In this way, the best resources from both worlds can be better utilized.

What are the main economic clusters that are changing the international specialization profile of China?

China is on everyone's map. An effective channel is built and being expanded. More international companies will add programs to get more from China, both as a factory and market. There is a need for China to move beyond a mere manufacturing hub. The urgent needs include a better banking, more effective financial system and services, and a higher intellectual work. For a long time, China is known as a cheap labor hub. Now international businesses realize that there is a vast pool of intellectual talents in China. Oracle and HP only need to pay $800 monthly to get a top Chinese engineer. For this, India is far ahead of China. Indian IT companies are also leading global players.

What's your main advice for foreign investors, particularly from Europe?

There are great success stories of European companies in China. They include names like Glaxo, Zeneca, Nestlé, Nokia, Siemens, Unilever, Philips, BP, Fiat, Carrefour, H&Q, Makro, HSBC and Volkswagen, among many others. Siemens has 30,000 Chinese employees and 45 factories in China now. For Volkswagen, China contributes 20% sales already. It is adding 8 billion euros now and hopes to make China half of its global business. Carrefour can make more profits in China than in any other place. Now, it has 60 mega stores and is adding more. Its only problem, seemingly, is that American Wal-Mart is following its tails. For Unilever, China is already its heaven for profits. But it must compete with American P&G and many other brands.

How did they succeed?

Well, all happy players are the same, while the unhappy ones each has its own stories. The successful ones have done all the right things in China. These things include long-term commitment, well-organized and flexible organizations, realistic strategies, and most significantly, leadership. Also, a localized management is significant. No shortcuts. The bottom line is this: grow with China. My book offers more than a dozen case studies, both successes and failures
© Gurusonline.tv, December 2004

A TALE OF A NEW AFFLUENT CHINA
"China will be turned into a nation called Global China. This makes a strong contrast to what is inside Japan where things are still a Japanese play at large. But China's theater will have countless international actors."

What are the main growth "engines" today in China?

Consumer products. One example, by the end of 2004, China had 330 million mobile phone users. So far, international suppliers have made more profits by selling their chips, components, equipment and raw materials to the growing Chinese manufacturers. But the badly needed things are services, especially financial, education, logistics and retail. In short, China needs everything and anything can be profitable if done right.

Can we consider that a middle class is booming in the Chinese society?

Urban centers are the hubs of great wealth. So, 50 top Chinese cities possibly take 50% or more of wealth in China. Most urban residents in the big cities are already middle class one way or another. Of which, businessmen, teachers, civil servants and professionals are the core. The rural income growth is less impressive. But 150 million rural migrant workers effectively narrow the gap. Many of them make profits in cities. They then open their own shops at home. It is said that they run millions of small retail outlets and beauty shops now. This is a very significant factor in promoting an overall development.

Probably in less than a decade China will have more cybernauts and customers (for a market economy) than the US. What will be the major consequences?

It will produce more international flavors. It will be more open, diverse and mature, but more competitions as well. In a way, China will be turned into a nation called Global China. This makes a strong contrast to what is inside Japan where things are still a Japanese play at large. But China's theater will have countless international actors. In many sectors, such as auto, films, beauty products, retail, and IT, the foreign businesses are also the leading players. In short, China is becoming a global theater. This makes China's development more positive and interesting. A grand lesson from China is this: no nation can truly develop without making itself open to the world.

A PERSONAL STORY
THE LUCKY GENERATION

What impressed you more - as a young urban Chinese - in the shift period after the fall of the "Gang of Four" (the leftist heirs of Mao)?

It was an age of wonder and hope. The most impressive thing in 1978 was that colleges were reopen. Some of us, say 4% of youth, could go to college (Today, this number is much bigger). Before then, for some 12 years, urban high school graduates were sent to work in rural regions. All in the sudden, we could get a college education. Immediately, schoolteachers became important. Also, kids took books seriously. Some incidents happened where kids who failed to enter college committed suicide. It was also an age of eye opening and rationalizing. In the late 1970s, a traditional government centered society suddenly became restless, having gone through all the bitter events. All Chinese became interested in things outside China, anything and everything. We were eager to know what is in the outside world. We developed a mentality that everything in the West was great and everything at home bad. That was the beginning point to open China to the outside world. By the high intensity, we vaguely felt that bigger things would emerge. Yet, we did not quite know what.

In your book you consider yourself and the generation born in the 1960's as a lucky generation. Why?

This generation is a lucky group indeed. They directly entered the era of reform at the right age. They have more opportunities than their elders. They have been young enough to get what they want. The society has changed so that they can focus on things they are interested. Many high-profile businessmen today are in this age group. They are more open and eager to accept international things.

Do you think this lucky generation is today the anchor for the changes needed?

This lucky generation has done a right job. They have performed a leadership role in changing things for the last two decades. They have created a new competitive economy at large. But the future belongs to the younger generations. They are more open, their tastes are more international, their desires boundless. They are more egoistic, entrepreneurial and better educated. They will lead China into the next stage for sure. Also, changes are so dramatic that an 8-year difference may make a new generation - a reality in China today.

STORY NUMBER TWO
A critical view from the center of the Global Power
Chalmers Johnson
CHINA REPLACED THE UNITED STATES AS THE TOP EXPORTER TO JAPAN
"The US is treading the same path followed by the former USSR"

Chalmers Johnson is concluding a trilogy of books devoted to the decline of the US global power. Blowback: The Costs and Consequences of American Empire (New York: Holt Metropolitan Books, 2000) was the first and The Sorrows of Empire: Militarism, Secrecy, and the End of the Republic was published by Metropolitan in 2004. Blowback won the 2001 American Book Award of the Before Columbus Foundation. Both books have translations for Portuguese (with Brazilian Grupo Editorial Record - www.record.com.br) and Spanish (with Editorial Crítica in Barcelona - www.ed-critica.es - and Editorial Laetoli of Pamplona - www.laetoli.net). The final book of the trilogy is titled Twilight of the American Republic and will deal with "the consequences of American imperialism and militarism". The main argument of the trilogy: the US is embarked on a path not so dissimilar from that of the Soviet Union in its decline period. "The United States was by far the wealthier of the two Cold War superpowers, so it will certainly take longer for the sclerosis to set in and for the collapse of the whole edifice", said Chalmers to Gurusonline. This decline of the US gives a window of opportunity for global challengers. Chalmers Johnson is president of the Japan Policy Research Institute, a non-profit research and public affairs organization based in California and devoted to public education concerning Japan and international relations in the Pacific. He taught for thirty years, 1962-1992, at the Berkeley and San Diego campuses of the University of California and held endowed chairs in Asian politics at both of them. At Berkeley he served as chairman of the Center for Chinese Studies and as chairman of the Department of Political Science. His B.A., M.A., and Ph.D. degrees in economics and political science are all from the University of California, Berkeley. His personal story is linked with Asia. He first visited Japan in 1953 as a U.S. Navy officer and has lived and worked there with his wife, the anthropologist Sheila K. Johnson, every year between 1961 and 1998. Chalmers has been honored with fellowships from the Ford Foundation, the Social Science Research Council, and the Guggenheim Foundation; and in 1976 he was elected a fellow of the American Academy of Arts and Sciences. He has written numerous articles and reviews and sixteen books, including Peasant Nationalism and Communist Power on the Chinese Revolution, An Instance of Treason on Japan's most famous spy, Revolutionary Change on the theory of violent protest movements, and MITI and the Japanese Miracle on Japanese economic development. He was chairman of the academic advisory committee for the PBS American television series "The Pacific Century," and he played a prominent role in the PBS "Frontline" documentary "Losing the War with Japan." Both won Emmy awards. Chalmers Johnson is a member of the American Empire Project.

Website of the American Empire Project
Website of the Japan Policy Research Institute
Blowback at Amazon
The Sorrows of Empire at Amazon
Chalmers Johnson can be contacted by email

INTERVIEW

US Global Power is at the end of its geo-political cycle? Or can the US double the hegemonic mandate as the British did for more than 200 years?

I believe that the United States today is treading the same path followed by the former USSR up to its collapse in 1991. There were three main causes of the Soviet disintegration, all of which are starting seriously to assail the United States.

Can you detail?

First, extreme rigidity in economic institutions, dictated by an overly literal reading of either Marxist-Leninist or capitalist ideologies. The U.S. today is characterized by a union between capitalist robber-barons and extreme right-wing politicians, much like the so-called "gilded age" of 1890 to 1914. Corruption in government-business relations is deep and institutionalized, as we see in cases like Enron, the weak governmental oversight of the pharmaceutical industry, and in the gutting of the environmental protection laws for the sake of big corporations. The second cause was imperial overstretch, as defined by historian Paul Kennedy. The U.S. today has over 700 military bases in 132 countries and is going deeply into debt maintaining them, on top of its military adventures in Iraq and Afghanistan. This is a fatal condition. Third, inability to reform. In the case of the former USSR, Gorbachev tried to reform the system through "perestroika" and "glasnost" but failed. The U.S. is not even trying to reform itself. Instead, the public has re-elected the suicidal George W. Bush as president.

First Idea: "The World changed on November 2, 2004. Bush's war has changed into America's War".

To achieve an extended period of hegemony in the middle of great change in the geo-political arena, what is more "suitable" for US Global Power - an "indirect approach" or a "pre-emptive" strategy? Voting for George W. Bush second term, the majority of Americans apparently expressed their "feeling" that US must act openly as a lonely hegemonic power, in the traditional warfare way that dominate the geo-politics till the end of 2nd World War?

The world changed on November 2, 2004. Until then, ordinary citizens of the United States could claim that our foreign policy, including our invasion of Iraq, was George W. Bush's doing and that we had not voted for him. In 2000, Bush lost the popular vote. This time he won it by over 3.5 million votes. The result is that Bush's war has changed into America's war.

What's the consequence?

Whether the American people intended that or not, they are now seen to have endorsed torture of captives at Abu Ghraib prison in Iraq, at Bagram Air Base in Kabul, and at Guantánamo Bay, Cuba; a rigged economy based on record-setting trade and fiscal deficits; the greatest reliance on secrecy of any postwar American government; the replacement of international law with preventive war; an epidemic of nuclear proliferation; and many other aberrations that can only elicit hostile and defensive reactions in all other nations of the world. For supporters of American imperialism, an indirect approach, such as that of former president Clinton, is much to be preferred. He disguised American hegemony under such rubrics as "humanitarian intervention" (Serbia and Kosovo) and "globalization" (using the IMF to make the poor countries of Latin America even poorer) and pretending to support the U.N. Security Council. George W. Bush has dropped the mask and is proclaiming a unilateral right to bring about regime change in countries that try to resist America's imperial sway (the "axis of evil"). As a result the world today is quietly and indirectly creating structures to frustrate anything and everything the Americans try to do in the world. When the American empire collapses the world will be no more sorry to see it go than when the Soviet empire collapsed.

The third globalization wave of the 1970's and 1980's of last century is over, as you mention at your recent book?

As I argue in Chapter Nine of The Sorrows of Empire, globalization has now been revealed as a hoax sponsored by the United States. Globalization is an attempt to camouflage American economic imperialism by claiming that American behavior abroad is dictated by ineluctable forces and technological developments, not by conscious policy. It was the aftermath of the September 11, 2001, that more or less spelled the end of globalization. Whereas the Clinton Administration strongly espoused economic imperialism, the Bush government was unequivocally committed to military imperialism. However, whenever globalization might damage American economic interests, it is invariably ignored (as in George W. Bush's protection of the domestic steel industry and America's agro businesses). Increasingly even people who believed in pro-globalization solutions to international economic and environmental problems threw up their hands in despair. The only people left who believe in globalization are university professors of economics, who continue year-in and year-out to recycle their old lectures.

Second Idea: "The twenty-first century will certainly be dominated by a rich, confident, and well-educated East Asia but it will also feature the continued integration of the European Union and the development of a genuinely anti-American bloc in Latin America and the Caribbean"

The Asia Rising - more than the US twin deficits and the new terrorism - will be the main obstacle for the extension of the US hegemonic role? Do you think that, finally, the 21 century will be the truly "Asian Century"?

The U.S.'s military stance in East Asia is anachronistic. The major trends in the area are commercial, including China's decisive turn toward capitalist economic development, free-trade agreements between the Southeast Asian countries and China, and the growing economic integration between Taiwan and the Chinese Mainland. As China begins to achieve levels of wealth comparable to those of the rest of East Asia, a basis for genuine stability, not one imposed by military force, is created. The main cause for pessimism in East Asia is the political and economic situation in Japan. The twenty-first century will certainly be dominated by a rich, confident, and well-educated East Asia but it will also feature the continued integration of the European Union and the development of a genuinely anti-American bloc in Latin America and the Caribbean. The most important developments are the opening of the China market to Latin American agricultural exports, China's competition with the United States for Canadian oil, and China's long-term investments in countries like Iran and Kazakhstan. The old-fashioned reliance on military force will probably drag the United States down and Japan with it.

Can China emerge as a global challenger for the US hegemony? Or its emergence will be episodic like the Japanese short take-off as a global economic challenger in the 1980's? Is China able to grow even if slowly a sustainable coalition against the incumbent power?

China is destined to become a superpower -- one with an economy as big as that of the United States with five times the population. China is not a military threat to the world, but it will soon have the capacity to defend itself against American aircraft carriers and satellite surveillance systems. China's achievement of great economic strength might have military implications in the future, particularly if the United States continues to menace it, but economic growth is more likely to give the Chinese people a stake in peace and stability and provide the foundations for a transition to democracy comparable to the one that occurred in Taiwan in the late 1980s. Taiwan today enjoys democratic government, but until 1988 it was ruled by a single-party autocratic regime that had imposed martial law for forty years. The achievement of high levels of income in Taiwan ultimately made the authoritarianism of the Nationalist Party untenable and led to the end of its monopoly of power. That is what is happening in China today. The greatest threat to further progress is the warmongering of the United States.

Can you give an economic fact that expresses the change of relations between the two powers - China and Japan - in Asia Pacific?

As a sign of this Chinese progress, in the second half of 2002, China replaced the United States as the top exporter to Japan. China is still Japan's number two trading partner behind the United States, but the figures indicate that China is rapidly passing the U.S. as the top exporter to Japan. Roughly 17.8 percent of all goods imported by Japan came from China during the first half of 2002, according to the Japan External Trade Organization (JETRO). That is just behind the U.S., which accounted for 18.2 percent of Japan's imports over the period. But whereas imports from China increased over the period, imports from the U.S. decreased -- narrowing the gap. The growing economic integration between China and Japan and China and Taiwan reveals how threadbare the United States emphasis on military bases and carrier task forces has become.

Third Idea: "During the 1990s Japan's political system failed to reorient the country's economic strategy, and thus Japan began a long decline until it may soon become the Argentina of East Asia - a once-rich country that has lost its way"

As a privileged observer of the Japanese reality, do you think Japan can reemerge as one of the global powers, or Europe, China and India will "bury" the Japanese Dream?

Japan is the sick man of Asia. After Japan's tremendous postwar economic growth, it made several decisive errors. Instead of enlarging domestic demand and establishing mutually beneficial trading relations with the other countries of East Asia, it continued to rely on its old Cold War relationship with the United States. During the 1990s Japan's political system failed to reorient the country's economic strategy, and thus Japan began a long decline until it may soon become the Argentina of East Asia - a once-rich country that has lost its way. It has tied itself too closely to the United States as a military satellite and economic dependency. As a result it is in danger of losing its ability to adjust to the world of post-communist Asia. As the country's decade-long economic recession continues and its political system has proven unequal to the challenge, Japan seems unable to forge an effective economic strategy. Japan is beginning to look like a one-time prosperous country that through complacency and an obsequious pursuit of American economic nostrums is declining into mediocrity.

Do you think Japan can reverse that trend?

Despite innumerable calls for reform and continuous churning of the Japanese political system, nothing has changed. Its single-party system is still torn by corruption and incompetence. Japan's only real future lies in cooperative integration with China and the rest of East Asia. So far many Japanese businesses understand this and are making important investments in China. But the prognosis is not good. Japan needs a revolution, one that its leaders cannot envisage and that its American military masters would try to frustrate if it ever seemed likely to succeed.

From the recent US "pre-emptive" doctrine first applied in the Middle East, what kind of "blowbacks" can we expect at the world level?

Let me begin with the concept of "blowback". Even an Empire cannot control the long-term effects of its policies. That is the essence of blowback. The term was invented by officials of CIA for their internal use, but started to circulate among students of international relations. It refers to the unintended consequences of policies that where kept secret from the American people. And because we live in an increasingly interconnected international system, we are all, in a sense, living in a blowback world.

And about the long-term mean of Iraq operation?

The Iraq war is very possibly the most serious self-inflicted wound in the history of American foreign policy. It was caused by American imperialism and militarism, which are the subjects of my recent book The Sorrows of Empire.

Imperialism and militarism are not outdated ideological terms?

Let me make clear what I mean by imperialism and militarism. According to the Pentagon's annual inventory of real estate -- its so-called Base Structure Report -- we have over 725 military bases in some 132 countries around the world. This vast network of American bases constitutes a new form of empire -- an empire of military enclaves rather than of colonies as in older forms of imperialism. Our military deploys well over half a million soldiers, spies, technicians, teachers, dependents, and civilian contractors in other nations. To dominate the oceans and seas of the world, we maintain some twelve carrier task-forces, which constitute floating bases. We operate numerous espionage bases not included in the Base Structure Report to spy on what the people of the world, including our own citizens, are saying, faxing, or e-mailing to one another. Our installations abroad bring huge profits to civilian industries, which design and manufacture weapons for the armed forces or, like the now well-publicized Kellogg, Brown & Root Company, a subsidiary of the Halliburton Corporation of Houston, undertake contract services to build and maintain our outposts. One task of such contractors is to keep uniformed members of the imperium housed in comfortable quarters, well fed, amused, and supplied with enjoyable, affordable vacation facilities. As an official with Kellogg, Brown & Root put it, "We do everything but pull the trigger." In Iraq, there is evidence that they also do some of that. Today we have a professional, permanent standing army, plus its array of privately outsourced services, that costs around three-quarters of a trillion dollars a year -- that is, about $750 billion. This amount includes the annual Defense Department appropriation for weapons and salaries of more than $425 billion, plus another $75 billion for Iraq and Afghanistan operations, $20 billion for nuclear weapons in the Department of Energy, and at least $200 billion in pensions and disability payments for our veterans. We are not actually paying for these expenses but putting them on the tab. Since we are today running the largest governmental and trade deficits in modern economic history, our militarism threatens us with bankruptcy. The final sorrow of empire is financial ruin. It is the only sorrow that will certainly lead to a crisis. In my book I devote the final chapter to the likely consequences of our imperialism and militarism. These are perpetual war, the end of the Republic, official lying and disinformation, and bankruptcy. I go into detail on each, documenting how advanced they are in our society. My intent is to mobilize inattentive citizens to information that I know they don't have because our government does everything in its power to see that they don't, but that they need if they are not to lose our Republic and the civil liberties it defends.

Fourth Idea: "The main feature to watch for within the United States is the progressive enlargement of the power of the Pentagon leading eventually to a military take-over of the government"

In a prospective approach what kind of unexpected events, emergent signals or other geo-political footprints and trends do we must follow with particular attention?

The main feature to watch for within the United States is the progressive enlargement of the power of the Pentagon leading eventually to a military take-over of the government. The Roman Republic, from which the founders of the United States drew many institutional precedents (separation of powers, term limits, fixed elections, toleration of slavery), offers the best example of the pattern. The Roman republic, which collapsed in 27 BC, failed to adjust to the unintended consequences of its imperialism, leading to a drastic alteration in its form of government. The militarism that inescapably accompanied Rome's imperial projects slowly undermined its constitution as well as the very considerable political and human rights its citizens enjoyed. The American republic, of course, has not yet collapsed; it is just under considerable strain as the imperial presidency-and its supporting military legions-undermine congress and the courts. However, the Roman outcome-turning over power to an autocracy backed by military force and welcomed by ordinary citizens because it seemed to bring stability-suggests what might happen after Bush and his neoconservatives are thrown out of office.

Can you tell us the main subject of your forthcoming book?

I did not set out to write a trilogy on the twilight of the American republic. It was dictated by events. Blowback (2000) predicted that victims of our clandestine activities abroad would carry out some form of retaliation against the United States. This occurred on September 11, 2001. The Sorrows of Empire (2004) detailed the connection between our growing imperialism and our militarism. Twilight of the American Republic, the final book of the trilogy, spells out the trap we have set for ourselves and the likely failure of the American political system to heal the wound we have sustained as a nation. It portends the decline and fall of the American republic. Twilight consists of seven interrelated chapters, ranging from an analysis of the trap itself -- the president's breaking the balance among the branches of our government because of his use of a secret, unaccountable army under his personal command (the CIA) -- to the inevitable bankruptcy that will accompany our imperial overstretch and isolation in the world. Salient features of this book are a chapter on how militarism and imperialism destroyed one of the models the founding fathers drew upon in creating our government: the Roman republic; an up-to-date exposé of the military-industrial complex and its huge vested interests in more wars; and a new and original report on one of the most secret aspects of our imperialism-how we use the Status of Forces Agreements (SOFAs) we impose on our satellites to keep them in line and ensure that they help pay for the upkeep of our empire.

Fifth Idea: "The only thing that will work is a series of events that will cause considerable suffering for most ideologically mesmerized Americans"

What was the main feedback to "The Sorrows of Empire" that impressed you more?

Americans are scared. They fear that we have already crossed our own Rubicon and that there is no way to reverse the deteriorating conditions we have created domestically and internationally. A majority of U.S. voters seemed to regard November 2nd as "An Electoral Affirmation of Shared Vales," which is the title of a front-page article by Todd Purdum in the November 4, 2004, New York Times. According to a survey that a consortium of all the major news agencies in the country conducted on election day, the American public put "moral values" ahead of the economy, "terrorism," Iraq, health care, taxes, and education, as the "issue that mattered most." Of the people who chose "moral values" as their top issue, 80 percent voted for Bush. For people who chose the economy, 80 percent voted for Kerry. Nearly one-quarter of the electorate was made up of white evangelical and born-again Christians, and they voted four to one for Bush. They are totalitarians in the strictest meaning of the word. The thought that American policy is being made by religious fundamentalists may well drain all legitimacy from virtually everything the U.S. tries to do in the world. The Sorrows of Empire was a very successful hard-back best seller in the United States, but it was not read by the overwhelming mass of Americans, who are ill informed about the world and about their own government. It is not clear that the American public can be enlightened by any book. The only thing that will work is a series of events that will cause considerable suffering for most ideologically mesmerized Americans -- which is precisely what is unfolding in Iraq.
© Gurusonline.tv, December 2004

THIRD STORY
A contrarian view from Europe
Andre Gunder Frank
RISING DRAGON
"We are witnessing the re-emergence of Asia"

The 21 Century will be Asian. But first the US global power must be "dethroned" and Asia and Europe have a common interest in doing so - that's the argument of André Gunder Frank, 75, a contrarian economic historian and globe-trotter since he was born in Berlin in 1929. Surprisingly, Gunder Frank reverse all the traditional Braudel historiography about the "eurocentric" hegemony of geo-politics since the Discoveries by the Portuguese lead by Henry the Navigator till the US emergence in the 19th Century. His research in the 1990's published in his book ReOrient: Global Economy in the Asian Age, 1400-1800 (University of California Press, 1998), reexamined world historical evidence which shows that Asia was predominant in the world before and still during that entire period between the 15th and the 19th Centuries. Even China did not really "decline" until after the Second Opium War in 1860. That's why Frank entitled is forthcoming book ReOrient the 19th Century as well. The geo-political consequences of this argument are uncomfortable for western euroatlantists: first, the Western hegemony is much more recent and short than the common idea, and "perhaps passing", says a provocative Frank; second, the present Asia rising, and particularly China rising, is a re-emergence, a coming back to the balance of power before the 19 Century. All the life of Gunder Frank was an "Oddisey"" around several continents - he is truly a "global" citizen, managing seven languages ("but in each one of them badly at best", he says laughing). He left Germany to Switzerland as a 4 years kid when his parents had to escape the Nazi regime in the 1930's. In 1941 Frank family entered the United States. He was educated at the University of Chicago, where he received his Ph.D in Economics in 1957 with a dissertation on Soviet Agriculture. In 1962 he went to Latin America and became associate professor at the University of Brasilia. He was head of staff for President João "Jango" Goulart, until the military coup of 1964. He went to Chile and then to Mexico, and from 1966 to 1968 he was professor in Montreal, Canada. In 1968 he came again to Chile, where he was involved in the reforms of the late President Salvador Allende. After the military coup of Pinochet in 1973, Frank and family escaped to Germany. From the 1970's till the present, he changed country frequently. His elder son says that he has moved 43 times with his father. Andre Gunder Frank was linked to the "Dependence Theory" of the sixties, as one of the founders. The motto of that decade was the "development of underdevelopment" In Latin America and in the Third World. In the 1990's, Frank changed his attention to world history and became this contrarian research about the world system in the last five thousand years. Frank is the same human that, as a young searching for employment in the States, was considered, by a test, with "aptitude for nothing, and especially no intellectual aptitude". Some of the short answers that André Gunder Frank gave to Gurusonline speak for themselves. Frank works now as an associate of Luxembourg Institute for European and International Studies, and also as a visiting professor of the Universita di Calabria, in Italy. He is a senior fellow of the World History Center, in Boston.

ReOrient: Global Economy in the Asian Age, 1400-1800 at Amazon
Website of Frank

INTERVIEW

The Chinese are shocked when analysts from Europe or the US tell them that the 21 Century will be "Chinese" and that China will be the challenger of the US global power. Pragmatically they say they prefer that geo-politics do not mess its strategic long goal of economic development. What is your opinion?

None for now about what the Chinese say.

One of the conclusions of your recent studies about the world system it is the contrarian idea that the Western hegemonic geo-political cycle is a short historical period, probably from the Second Opium War in 1860 till now, with a short Pax Britannica and afterwards a Pax Americana. This contradicts also the studies about the long geo political cycles that identifies the Portuguese as the first global power in the XV Century. Why you argue so clearly against this westernised view of history, referring, on the contrary, the centrality of Asia?

The common idea is clearly nonsense. Little Portugal and Netherlands could not possibly have exercised hegemony over the world. And of course they did NOT in Asia where most of the world lived/lives. Even trade, they never had even 10 percent of Indian Ocean or South China Sea trade, none of the north China Sea and none of the caravan trade. Actually British hegemony was not much and not long nor US either. Since my book World System (1993) edited with Barry K. Gills, we argue that the contemporary world system has a long history in which the rise to dominance of Europe and the West are only recent - and perhaps passing - events. My main thesis is conveyed by my little book The Centrality of Central Asia (1992). Central Asia remained an important economic crossroads until at least 1800, was the site of the "great game" for its domination by others in the 19 Century, and again for yet another "great game" of geo-political domination. Then, in my book of 1998 titled ReOrient: Global Economy in the Asian Age (1400-1800), I examine world historical evidence which shows that Asia was predominant in the world before and still during that entire period. Even China did not really "decline" until the Second Opium War in 1860. That is why I am entitling my forthcoming book as ReOrient the 19th Century.

So, you consider that the present Chinese world emergence is a kind of re-emergence, a path to a return to the balance of power before the mid-19th century?

Yes. My recent papers argue for the opportunity and likelihood of an Asian alternative. It is noteworthy that the economically most dynamic regions of East Asia today are also still or again exactly the same ones as before 1800 and which survived into the 19th Century. Asia, and China in particular, are very likely to recover the predominant place and role in the world economy that they already had until at least 1800.

What could be the role of Europe in this transition?

Also an important participant. There was no hegemony then and probably will not be now.

The 4/5 of the US debt is financed and supported by Asia. Almost 45% of the US Treasury Bonds are hold by the Chinese Central Bank. US future is an hostage and depends on the humour of Asia?

The US trade deficit is now 550 billion a year and still growing. Every year, 100 billion is supplied by Europeans, other 100 by China and about 120 by Japanese. The rest is supplied by others, especially other East Asians - Taiwan, South Korea, Malaysia, and also by India now. Of the 700 billions treasury bonds, Chinese Central Bank holds 300 already, and the Bank of Japan, Europeans, and oil exporters most of the rest.

What could be in the future the spark that can trigger the whole change of this "arrangement"?

China has the power to make the yuan an alternative reserve currency in world trade by simply denominating all Chinese exports in yuan. This sovereign action can be taken unilaterally at any time of China's choosing. A dollar crash would wipe out the Americans' free lunch and dinner. It would show up the US as the weak giant Paper Tiger that it is. But Americans don't know that and why they consume for free now in a kind of doughnut economy, and they won't understand why they suddenly cannot do so any more. Listen - China could double its per capita income very quickly if it made more real investments at home instead of financial ones in declining dollars and paper-US treasury bonds.

From 1896 (when the British discovered astonished the "Made in Germany" and heard of the presidential election of Mac Kinsley in the US) till 1945 we have a period of terrible transition from one global power to another. Do you think we can have a similar transitional period till the middle of this Century?

Yep, would be my response.

© Gurusonline.tv, December 2004