The New Liberal World Order

The New Liberal World Order

Global leadership with Chinese characteristics?

The rules-based political and economic world order, which emerged after the Second World War, is generally termed as the liberal world order. Although it is generally believed that the liberal world order is a set of universally-acknowledged values, it was, in fact, a partial and a geographically limited order that was supported by the democracies of North America, Western Europe and East Asia. The members of the system came together with a shared commitment to certain universal principles, e.g. individual freedoms, political equality, rule of law, democratic self-government, through alliances and multilateral consultative mechanisms. The liberal world order underpinned commitment to open trade, emphasis on multilateralism rather than bilateralism or unilateralism, multilateral financial development institutions like the World Bank and the IMF, free flow of capital across the national borders, large-scale migration and adherence to global commons like piracy, crimes against humanity, climate change and ecological conservatism. Since economic and political order encompassed all those values which were being advocated by the US administration throughout the 20th century, it is rightly asserted that the Unites States was the chief architect of the liberal world order.

The current liberal world order has evolved through different phases. From 1940s through 1970s, this order emphasized an embedded liberalism that was a blend of free market economy and state management of national resources. Afterwards, it evolved into neoliberalism that stressed upon non-interference on the part of the state in managing national resources and regulating market forces. The collapse of the USSR in 1990 was widely construed as the triumph of neoliberalism against all the competitive ideologies like communism, socialism and Islam. Even Francis Fukuyama, a noted American political scientist, termed the fall of the USSR the end of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of government. It was the same confidence with which the West applied liberal engagement policy for the induction of China and Russia into global liberal system out of the conviction that ultimately both of them would abandon their respective domestic social and political configurations in favour of liberal democracy; as their conservative societies would not be able to withstand the pressure exerted by the West-based, US-supported liberal world order.

The assertions were, nonetheless, wrong and the assumptions fallacious. The precipitous decline of seemingly unchallengeable liberal order started with the catastrophic financial crisis of 2008. This recession caused the emergence of many anti-liberal and anti-globalist forces in the Western world as well as in North America. Although the liberal order had been facing the competitive ideologies like conservatism, secularism, constitutionalism, nationalism, tribalism, militant nationalism, fascism, communism and Islamic fundamentalism, the financial shocks posed daunting challenges within the Western countries in the form of populism and anti-establishmentarianism. The crisis, on the other hand, revived the confidence of China which, thus, began asserting itself as a preponderant economic and military power in regional affairs.

There are many economic and political manifestations of liberalism that have helped, and are helping, China to lead the world. China is the biggest beneficiary of the liberal world order. Open trade, free flow of capital, unhindered technological diffusion and other processes of globalization have helped China sustain its growth rate of above six percent for a decade or so. The sustained growth has translated into formulation of an ever-assertive foreign policy that is underpinned by the fact that it is the second largest military power in the world and that it may surpass the economic might of the United States within only a few years. Keeping in view China’s growing presence in international arena, President Xi’s ‘One Belt, One Road’ (OBOR) initiative that is meant to increase regional connectivity through operationalizing land-based Silk Road and Maritime Silk Route with an estimated cost of $8 trillion is being considered a thinly-veiled strategic move to enhance China’s geo-economic and geo-strategic significance – also relevance. Now that Trumpism (a blend of protectionism, militant nationalism and isolationism) and populism have severely undermined the West-led liberalism and US’s gradual retreat in security and economic realms, as well as in the arena of global commons, have provided China with an unprecedented window of opportunity to fill the power void and emerge as a responsible power that is capable of assuming global leadership.

Read More: Is the LIBERAL WORLD ORDER Collapsing?

In spite of the fact that the US wields an unrivalled market power – supported by US dollar’s status as a global reserve of currency – and China has a limited defence budget (only one-third of that of the United States) and that the latter’s growth has been arrested by ills like overcapacity and spiralling debt, China has become a formidable economic power that is poised to outpace the US economy by 2020. With growing wealth, came a desire of playing a significant role in international affairs. Since the 2008 financial crisis, China has increasingly asserted itself in security, economic and political affairs at regional level. Analysts believe that the OBOR has effected an unprecedented rise in China’s global clout and the massive investments in dozens of countries across the globe has now started paying off in the form of enhanced influence of China. And, it is now weighing options to mould the international order according to its interests. Given this background, it seems pertinent to dissect congruities as well as incongruities between what China practices and what the West believes.

Notwithstanding the fact that China is the biggest beneficiary of the free market economy and all aspects of globalization, it is yet to fully adopt the Western model of economic, political and social organization. Contrary to the domestic economic and political dynamics of the United States, the so-called de-facto chief proponent of liberalization, China has adopted, albeit partly, the economic aspect of liberalization but spurned political manifestation of liberalism. Illiberal domestic regime, authoritarian and static version of capitalism, violation of human rights, marginalization of the minorities through DNA profiling of Uyghur Muslim community, banning religious rites, foisting of state-promoted Chinese culture on the ethnic minorities, jailing of hundreds and thousands of dissidents under the pretext of national security, controlled democracy, one-party rule and no limitation on the number of presidential tenures speak volumes about the non-conformity of Chinese political system to the core values of liberalism.

Although China has adopted the capitalist form of market economy, it adheres strictly to the mercantilism, instead of moving towards the increased market reliance. It has doubled down its mercantilist policy tools like subsidizing massively the state-owned enterprises, acquiring technology even by breaching intellectual property rights and squeezing space for foreign companies to do business in China through the application of coercive state regulations and administrative restrictions on imports and foreign investments. In its foreign policy realm, too, liberal credentials of China are plagued with contradictions. On the one hand, it demands other countries to open up their markets for Chinese goods while it itself implements semi-protectionist trade policy, on the other. Pakistan is one of the victims of this double standard. Trade deficit of Pakistan with China has widened up to $9 billion and many private companies in Pakistan are seen complaining about discriminatory tariffs and duties imposed on their textile exports to China. Even the ASEAN countries are awarded more favourable duties than those offered to Pakistan. Amidst China’s above-mentioned trade, political and financial policies, analysts have growing concerns on the future of liberalism as the country stands in direct contravention to the universally-held core values of liberalism in these arenas.

Although China is far from being termed a liberal country, its sustained growth and gradual ascendance are the byproducts of the policy of Deng Xiaoping who started, in 1978, the process of transmogrifying his country from a planned economy to a market economy. Given the miraculous achievements within the liberalistic framework, it is very hard to conclude that China would ever ponder to harm radically the current rules-based world order. It has not taken any step yet with an intention to disrupt the core tenets of this order. It has not only avoided disruptive interventions in other countries like Russia did in Ukraine – the annexation of Crimea – but has also rejected territorial conquests. Besides a firm adherence to these values, China’s publically stated stance on global connectivity, good governance and multilateralism would go a long way in reforming the current global system. China is also rendering invaluable services in providing leadership in the realms of global commons, ecological conservatism, low-carbon initiatives, globalized trade and regional connectivity through development of translational infrastructure of transport and communication. In this regard, the analysis of President Xi’s signature AIIB and OBOR initiative is worth making so as to predict the future of West-based and US-supported liberal order.

Asian Infrastructure Investment Bank was launched to finance regional infrastructural development. It was structured along the lines of Bretton Woods institutions – the World Bank and the IMF – and China deliberately hired the World Bank staff in order to send a message to the sceptical West that AIIB was initiated to supplement the current economic order rather than undermining it. Because of having provided half the original funding commitment of $100 billion and wielding a 27.5 percent share in voting, China enjoys the super majority voting right. The AIIB was aimed at consolidating Chinese domestic and foreign policy needs by operationalizing President Xi’s OBOR initiative. Now after nearly three years of its creation, the AIIB is playing a role that complements the global order. It has ensured competitive pluralism and has paved the way for new innovations in development models. With 64 member states, the AIIB is finding ways to meet the $20 trillion need of infrastructure funding of Asia-Pacific region. The same is the case with OBOR. The initiative which was viewed with deep suspicions is now being considered by many countries a reliable means of connectivity between large swathes of Asia and Europe.

President Xi’s address at the 2017 World Economic Forum in Davos points to China’s heightened interest in protecting the current economic order. In this very address, President Xi underscored the need for sustaining the economic globalization, global growth, international cooperation, governance and development. Amidst the waves upon waves of populism, protectionist trade, far-right-leaning politics that were sweeping the Europe and US, China emerged as a champion of liberal economic order.

We have contradictory approach on the part of China regarding liberalism or neoliberalism. But a thorough review of the Chinese initiatives indicates that we will see the continuation of legalistic international economic liberal order as the alternatives of this system – militant nationalism, protectionism and tribalism – would not serve the Chinese interest. We would see some reformist modifications on the part of China rather than radical ones. The world would see the co-existence of Chinese traditionalism with progressivism, Chinese economic pragmatism with globalization and Chinese modified Marxism with laissez faire. In short, we would have a Chinese Liberal Order.

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