A sophisticated insight into historical cycles, original interpretations of Adam Smith and Karl Marx, a breadth of foreign policy knowledge, and a knack for understanding human motivation. Late John Hopkins professor of sociology Giovanni Arrighi weaves these threads in his work Adam Smith in Beijing, and presents a case for the rise of East over West in the coming decades.
Arrighi opens by discussing the battle between capital and labour through the prisms of Smith and Marx. Smith differentiates between the natural and the unnatural path of economic development. These two paths are best understood in Smith’s own words:
” According to the natural course of things, therefore, the greater part of the capital of every growing society is, first, directed to agriculture, afterwards to manufactures, and last of all to foreign commerce. This order of things is so very natural, that in every society that had any territory, it has always, I believe, been in some degree observed…. But though this natural order of things must have taken place in some degree in every such society, it has, in all the modern states of Europe, been, in many respects, entirely inverted. The foreign commerce of some of their cities has introduced all their finer manufactures, or such as were fit for distant sale; and manufactures and foreign commerce together, have given birth to the principal improvements of agriculture. The manners and customs which the nature of their original government introduced, and which remained after that government was greatly altered, necessarily forced them into this unnatural and retrograde order. ”
Arrighi contends that the unnatural path leads to class conflicts as outlined by Marx, in which a relatively small class gain control/ownership over production and financing, resulting in the creation of industrial states. To ensure a fresh supply of markets, and returns above the costs of capital, such industrial states are incentivised to military build up and imperialistic action. Concurrently, the flow of capital from lower return areas to areas with lower competitive forces leads to a wave of create destruction. Eventually, accumulation collapses under the stress of administrative costs, most notably military spending, and the state suffers a decline.
Arrighi argues that President Bush’s economic and foreign policy aims were the culmination of a neoliberal attempt at world domination, akin to the adventures of previously fallen empires (such as the British). However the escalating cost of the Iraqi war/occupation, as well as loss of perceived total dominance on the battlefield in effect led to the unravelling of American hegemony. The point about costs is all important, as hegemony requires hegeMONEY. I was particularly struck by the differences the author highlights between the “US Empire” and the British. While the sun did eventually set on the British Empire they were able to prolong their rule by balancing their current account through raping overseas resources (primarily Indian), and using non-UK residents as army fodder (again primarily Indian). The US in contrast has no such resources.
An overextended US has left space for the East, notably China, to continue its steady rise. China by contrast followed Smith’s natural path of development – a large market economy managed by an active government. Some term this an industrious revolution, which leads to a large internal market, good supply of labour leading to a diverse skill base and economy, in which wealth is more widely dispersed. Natural development avoids the class distortions described by Marx.
It is this diverse and educated labour base that are well placed to continue a path of internal growth. Through China’s relatively stable/broader wealth creation and her influence on global financing, investment decisions and global power will continue to move from West to East.
I am not an economist by trade, but with a little effort, I found Adam Smith in Beijing very accessible. I’m sure an economist could find what to criticise, though from the point of view of a laymen I found the themes made common sense, appeared coherent, and provided me a valuable set of tools to judge global economics and its relation to foreign policy and power. From a layperson’s perspective my only criticism would be the one sided nature of the arguments. While I am also a sino-phile, I’m not blinded enough by my passion to assume that the road to greatness is inevitable. China will have to contend with other emerging powers (notably India), and will have to face issues such as human rights and democracy as well as environmental coherence.
All in all an intelligent and thought provoking read – go read it!