College of Arts and Sciences

Department of Political Science

MODULE 2.2
COLD WAR AND GLOBALIZATION

LEARNING OUTCOMES

After going through this module, you should be able to:

1. differentiate the world order during the Cold War from the world order under globalization;
2. compare and contrast the strategies of America and the former Soviet Union in containing each other
during the Cold War and the strategies of America and China in their current tech Cold War/trade war;
and
3. reflect on the kind of a globalized world that is dominated by America or China.

TOPIC OUTLINE

I. Causes of Cold War

II. End of Cold War
III. On the Risk of a Thucydides’ Trap

OVERVIEW

Another door of opportunity for meaningful learning has just opened. Keep track on your journey to the
wonderful contemporary world!

This module introduces you to the conditions of the world during Cold War and how it is similar or different
from that of today.

ACTIVATING PRIOR KNOWLEDGE

Write AGREE if you think the statement is correct; otherwise, write DISAGREE.

__________1. The Cold War significantly accelerated the process of globalization through technological
advancements and the space race.
__________2. Globalization during the Cold War was primarily driven by the economic competition between the
United States and the Soviet Union.
__________3. The Cold War hindered globalization by creating political and economic divisions between the
Eastern and Western blocs.
__________4. Cultural exchanges and soft power played a crucial role in shaping globalization during the Cold
War era.
__________5. The end of the Cold War marked the beginning of a new era of globalization characterized by
increased economic integration and international cooperation.

DISCUSSION1

An ideology can be defined as “a system of widely shared ideas, patterned beliefs, guiding norms and
values, and ideals accepted as truth by a particular group of people. Ideologies offer individuals a more or less
coherent picture of the world not only as it is, but also as it ought to be. In doing so, they help organize the

1Adopted from Lumsit, M. (n.d.). Module 2 -Topic 2. Cold War and Globalization. The Contemporary World. Baguio City:
University of the Cordilleras.
SOC SCI 103N – The Contemporary World Page 1 of 9
tremendous complexity of human experience into fairly simple, but frequently distorted, images that serve as
guide and compass for social and political action.” (Steger, 2003)

The Cold War period was a battle of two ideologies (communism and dictatorship for the Soviet Union vs.
capitalism and democracy for the United States). After the fall of the Soviet Union, the ideology of neoliberalism
is what the Global North (developed countries not the literal “North” although most of the developed countries
are located in the northern hemisphere) is now promoting. But before discussing what neoliberalism is, there is a
need to understand why the Cold War emerged and why it ended and there is also a need to have an overview
of the comparison between the Cold War and Globalization.

The Causes of the Cold War. One group of scholars, called traditionalists, claimed that the cause was the
former Soviet Union because it did not take the United Nations very seriously. It wanted to expand and dominate
its own sphere of influence in Eastern Europe. After the war, the United States demobilized its troops, whereas the
Soviet Union left large armies in Eastern Europe. And despite an agreement with Britain and US, Stalin did not
allow free elections in Poland. Soviet expansionism was further confirmed when the Soviet Union was slow to
remove its troops from northern Iran after the war. Eventually, they were removed, but only under pressure. In
1948, the communists took over the Czechoslovakian government. The Soviet Union blockaded Berlin in 1948 and
1949, trying to squeeze the Western governments out. And in 1950, communist North Korea’s armies invaded
South Korea. These events gradually awakened the United States to the threat of communist expansionism and
launched the Cold War. (excerpted from Nye & Welch, 2017)

Another group of scholars, called the revisionists, argued that the Cold War was caused by American
rather than Soviet expansionism. Their evidence is that at the end of World War II the world was not really bipolar.
The Soviets were much weaker than the United States, which was strengthened by the war and had nuclear
weapons, whereas the Soviets did not. The Soviet Union lost up to 30 million people during World War II, and
industrial production was only half its 1939 level. One subgroup of these revisionists claimed that Roosevelt’s death
in April 1945 was a critical event, because U.S. policy toward the Soviet Union became harsher after President
Harry S. Truman took office. In May 1945, the United States so precipitously cut off the lend-lease program of
wartime aid that some ships bound for Soviet ports had to turn around in midocean. At the Potsdam Conference
near Berlin in July 1945, Truman tried to intimidate Stalin by mentioning the atomic bomb. In 1948, Truman fired
Henry Wallace, his secretary of agriculture, who urged better relations with the Soviets. At the same time, James
Forrestal, Truman’s new secretary of defense, was a strong anti-communist. These revisionists say that these
personnel changes help explain why the United States became so anti-Soviet. The other subgroup of revisionists,
however, see the problem not in individuals, but in the nature of U.S. capitalism. They argue that the U.S. economy
required expansionism and that the United States planned to make the world safe not for democracy but for
capitalism. American economic hegemony could not tolerate any country that might try to organize an
autonomous economic area. (excerpted from Nye & Welch, 2017) They further argued that the Marshall Plan of
aid to Europe was simply a way to expand the U.S. economy. With the fast economic reconstruction and
rehabilitation of Western Europe (Eastern Europe rejected the aid), it became a trading partner of America which
emerged as the richest country after World War II, having not been affected by the two world wars that were
centered in continental Europe, home of the earlier world powers.

The third group, called the post-revisionists, claimed that in 1939, there was a multipolar world with seven
major powers, but after the destruction wrought by World War II, only two superpowers were left: the United States
and the Soviet Union. Bipolarity plus the postwar weakness of the European states created a power vacuum into
which the United States and the Soviet Union were drawn. They were bound to come into conflict; therefore, it is
pointless to look for blame. They also noted that the Soviets and the Americans had different kinds of goals at the
end of the war. The Soviets were more concerned with securing control of territory - both home territory and a
buffer sphere of influence - whereas the United States was primarily interested in setting up a liberal, rule-
governed international order. American milieu goals, in other words, clashed with the Soviets’ tangible possession
goals. (excerpted from Nye & Welch, 2017)

The United States promoted the global UN system; the Soviets worked to consolidate control of Eastern
Europe. But these differences were no reason for Americans to feel sanctimonious or self-righteous because the
United States benefited from the United Nations and, with a majority of allies voting, was not very constrained by
it. The Soviets may have had a sphere of influence in Eastern Europe, but the United States also had a sphere of
influence in the Western Hemisphere and Western Europe. The United States and the Soviet Union were both
bound to expand because of the age-old security dilemma of states in an anarchic system. Neither could allow
the other to dominate Europe. In other words, in an ideological bipolar world, a powerful state would use its
military power within its sphere of influence to reshape other societies in its image to ensure its own security. As
Roosevelt wrote in a letter to Stalin in the fall of 1944, “In this global war there is literally no question, political or
military, in which the United States is not interested.” Given this bipolar structure, a spiral of hostility set in: Hard
lines in one country bred hard lines in the other. (excerpted from Nye & Welch, 2017)

None of the three groups of scholars has an absolute explanation for the causes of the Cold War as they
viewed the phenomenon from varied perspectives and levels of analysis. What matters is in citing their varied
arguments, you were given background information about the Cold War that divided the world into two spheres.
In terms of international trade, a country’s relations with other states were primarily confined within the sphere or

SOC SCI 103N – The Contemporary World Page 2 of 9

bloc (America or Soviet Union) where it belongs, that is, socialist states traded with one another as the allies of
America traded also with each another.

The end of the Cold War. When the Soviet Union did not use force to support the communist government
in East Germany and the Berlin Wall was breached by jubilant crowds in November 1989, the Cold War could be
said to be over. But why did it end? One argument is that containment worked. It was argued after the end of
World War II that if the United States could prevent the Soviet Union from expanding, there would be no successes
to feed the ideology, and gradually Soviet communism would mellow. New ideas would arise, people would
realize that communism was not the wave of the future and that history was not on its side. There is little doubt
that U.S. military power kept the Soviet Union on its heels and that the soft power of American culture, values,
and ideas eroded communist ideology. (excerpted from Nye & Welch, 2017)

Another possible explanation is “imperial overstretch.” Historian Paul Kennedy has argued that empires
expand until overexpansion saps their internal strength. With more than a fourth of its economy devoted to
defense and foreign affairs (compared with 6 percent for the United States in the 1980s), the Soviet Union was
overstretched. But Kennedy went on to say that none of the overexpanded multinational empires in history ever
retreated to their own ethnic base until they had been defeated or weakened in a great power war, and the
Soviet Union had not. (excerpted from Nye & Welch, 2017)

A third explanation is that the U.S. military buildup in the 1980s forced the Soviets to surrender in the Cold
War, quite simply because they could not keep up. It is certainly true that the Soviet economy had difficulty
supporting an expensive arms race, particularly when, in the early days of what at the time people called the
“revolution in military affairs,” the Soviet Union was falling further and further behind the United States
technologically. But with very few (and short-lived) exceptions, the United States had always been ahead of the
Soviet Union technologically, its economy generally outperformed that of the Soviets, and arms races had been
the norm rather than the exception throughout the Cold War. (excerpted from Nye & Welch, 2017) The arms race
was a costly competition that fed on the financial resources of the Soviet Union. Added to this is the Soviet Union’s
self-imposed obligation of extending foreign aid to its satellite states.

The reformist policies of the last leader of the Soviet Union, Mikhail Gorbachev, resulted in the downfall of
his country and therefore precipitated the end of the Cold War. Mikhail Gorbachev wanted to reform
communism, not replace it. The reform, however, snowballed into a revolution driven from below rather than
controlled from above. In both his domestic and foreign policy, Gorbachev launched a number of actions that
accelerated the existing Soviet decline and hastened the end of the Cold War. When he first came to power in
1985, Gorbachev tried to discipline the Soviet people as a way to overcome economic stagnation. When
discipline was not enough to solve the problem, he launched the idea of perestroika, or “restructuring,” but he
was unable to restructure from the top because the Soviet bureaucrats kept thwarting his orders. To light a fire
under the bureaucrats, he used a strategy of glasnost, or open discussion and democratization. Gorbachev
believed that airing people’s discontent with the way the system was working would put pressure on the
bureaucrats and help perestroika work. But once glasnost and democratization let people say what they were
thinking and vote on it, many people said, “We want out. There is no new form of Soviet citizen.

This is an imperial dynasty, and we do not belong in this empire.” Gorbachev unleashed the disintegration
of the Soviet Union, which became increasingly evident after a failed coup by hard-liners in August 1991.
(excerpted from Nye & Welch, 2017)

By December 1991, the Soviet Union ceased to exist. Gorbachev’s foreign policy, which he called “new
thinking,” also contributed to the end of the Cold War. This policy had two very important elements. One was,
rather than try to build as many nuclear weapons as possible, Gorbachev proclaimed a doctrine of “sufficiency,”
holding a minimal number for protection. The other dimension was his view that expansionism is usually more
costly than beneficial. Soviet control over an empire in Eastern Europe, and its expensive subsidies to faraway
client states such as Cuba, were costing too much and providing too little benefit. The invasion of Afghanistan
proved to be a particularly costly disaster. Gorbachev believed that there had to be some way to provide for
Soviet security other than to impose and maintain “friendly” communist states on Soviet borders or elsewhere.
Thus, by the summer of 1989, Eastern Europeans were allowed a greater degree of freedom. Hungary permitted
East Germans to escape through its territory into Austria. This exodus of East Germans put enormous pressure on
the East German government. Additionally, Eastern European governments no longer had the nerve (or Soviet
backing) to put down demonstrations. In November, the Berlin Wall was pierced in a dramatic conclusion to a
crescendo of events occurring over a very short period. It can be argued that these events stemmed from
Gorbachev’s miscalculations. He thought that communism could be repaired, but in fact, in trying to repair it, he
punched a hole in it. And as if through a hole in a dam, the pent-up pressures began to escape, rapidly increasing
the opening and causing the entire system to collapse. (excerpted from Nye & Welch, 2017)

The fall of the Soviet Union and the subsequent democratic transition in the governments of Eastern Europe
and most of the former republics of the Soviet Union allowed varied states to negotiate for diplomatic and trade
ties which were limited during the Cold War. The Post-Cold War period realized the essence of “globalization” as
relationships between and among states as well as the operation of big corporations are no longer limited to a
specific part of the globe. Table 1 gives you an overview of the differences between these two periods of Cold

SOC SCI 103N – The Contemporary World Page 3 of 9

War and Globalization. As you go over the entries in the column for Cold War, try to identify the events/info from
the video about the Cold War that may illustrate the given entries.

Table 1
Comparison of the Cold War and Globalization

BASES COLD WAR GLOBALIZATION

Dominant Culture Cultural homogenization on a regional Largely but not entirely the spread of
scale, like the Russification of Eastern and Americanization – from Big Macs to iMacs
Central Europe, or in an earlier time, the to Mickey Mouse
Turkification of the Ottoman Empire, the
Hellenization of the Near East and the
Mediterranean under the Greeks
Defining Division Integration through its defining
Perspective technologies: computerization,
miniaturization, digitization, satellite
communications, fiber optics and the
Internet
Symbol A wall (the Berlin Wall) which divided World Wide Web which unites everyone
everyone
Defining Document The “treaty” The “deal”
Defining Weight – particularly the throw weight of Speed – the speed of commerce, travel,
Measurement missiles communication and innovation
Most Frequently How big is your missile? How fast is your modem?
Asked Question Countries that are most willing to let
capitalism quickly destroy inefficient
companies, so that money can be freed
up and directed to more innovative ones,
will thrive in an era of globalization unlike
those which rely on governments to
protect them from such creative
destruction.
Defining Anxiety Fear of annihilation from an enemy you Fear of rapid change from an enemy you
knew all too well in a world struggle that can’t see, touch or feel – a sense that
was fixed and stable your job, community or workplace can
be changed any moment by anonymous
economic and technological forces that
are anything but stable.
What We Reach for Hotline for the White House and the Internet – a symbol that we are all
Kremlin – a symbol that we were all connected but nobody is in charge
divided but at least someone, the two
superpowers, was in charge
Defining Defense Radar – to expose the threats coming X-ray machine – to expose the threats
System from the other side of the wall coming from within
Demographic Limited Rapid acceleration of the movement of
Pattern people from rural areas and agricultural
lifestyles to urban areas and urban
lifestyles more intimately linked with
global fashion, food, markets and
entertainment trends
Defining Structure Built exclusively around nation-states, Built around 3 balances that overlap and
of Power and it was balanced at the center by two affect one another
superpowers: the US and the Soviet Union Traditional Balance between nation-
states. US is the sole and dominant
superpower and all nations are
subordinate to it. The balance between
US and the others still matters, like the
expansion of NATO against Russia …

Between nation-states and global

markets. The global markets are made up
of millions of investors (called “the
Electronic Herd”) moving money around
the world with the click of a mouse, and
this herd gathers in key global financial
centers, such as Wall Street, Hong Kong,
London and Frankfurt (called “the
Supermarkets”). The herd and the

SOC SCI 103N – The Contemporary World Page 4 of 9

 supermarkets can destroy a nation-state
by downgrading the bonds offered by
these nation-states.
Between individuals and nation-states.
Because globalization has simultaneously
wired the world into networks, it gives
more power to individuals to influence
both markets and nation-states.

Source: Chapter 1, Friedman, T.L. (2000). The lexus and the olive tree. New York: Anchor Books.

The Cold War (1945-1989) was between two superpowers: USA and the former USSR. The Post-Cold War that
is defined by international trade is witnessing an economic competition between America (largest economy in
the world) and China (second largest economy in the world since 2010). Some critics call the competition to be
a “new Cold War,” but as argued in Module 2 Topic 1, the competition between China and US is basically a
trade war. It was also argued that under Globalization 4.0 and IR 4.0, no single country dominates the world
economy as rapid advances and innovations in technology are no longer the monopoly of America and Europe.

The following excerpt is an analysis of the current trade war or “tech Cold War” between US and China.

(Excerpt from Caron, J. (2021). A sketch of the world after the COVID-19 crisis: Essays on political authority,
the future of globalization, and the rise of China. Singapore: Palgrave Macmillan.)

On the Risk of a Thucydides’ Trap

China is the elephant in the room. This statement sums up both the origins of this pandemic as well as the
potential geopolitical outcomes of this crisis. Considering what has been discussed so far, the latter point is of
course of great concern. Indeed, if this crisis ends up sounding the death knell of globalization as we have known
it for the past fifty years and either lead to the resurgence of nation-states - which is the least promising outcome
- or to the formation of large economically autarkic regional blocks, China appears to be the greatest loser of
this pandemic.

If some may consider this a well-deserved fate due to the lack of proactive actions on the part of the
Chinese authorities to forbid the presence of ‘wet markets’ where these pandemic and previous sanitary
outbreaks such as SARS and H1N1 likely originated according to scientists and for its decision to hide the first signs
of the outbreak, which may have made things worse. However, when it comes to geopolitics, the desire for
revenge is the mother of all evils, as it can lead to resentment and ultimately war.

This is especially true when dealing with China, an increasingly powerful nation whose share of the global
economy continues to grow exponentially and that possesses significant military means (although to a lesser
extent than the United States). Considering revenge against a sleeping giant is, according to the late Prime
minister and founding father of Singapore, Lee Kwan Yew, ‘the biggest player in the history of the world - would
be a dramatic mistake with dire consequences. However, even if statesmen were to leave revenge aside, the
economic trends that will likely result from this crisis and that have been described so far appear in the eyes of
many as a feat that will dramatically hamper China’s economic ambitions. The current situation may be a first
taste of what is coming. Indeed, the world’s economy has come to a halt in the first half of 2020 because of the
imposition of measures that have disrupted supply chains and, consequently, weakened the global demand for
Chinese exports in the short-run and greatly affected its manufacturing sector. These trends may become more
permanent if the American and European economies seek self-sufficiency in the aftermath of the crisis. This
decision would hurt the growth of the Chinese economy, as it would unravel its commercial ties with the
economies of the US and EU.

Chinese authorities are very wary of such an outcome, as maintaining the country’s status as the factory
of the world - with the ‘Made in China’ stamp appearing on a third of the world’s manufactured products – has
clearly been voiced as a strategic priority. This certainly explains in part why China has been consistently trying
to reassure the rest of the world by sending comforting messages that it is able to meet affected countries’ high
demands for medicine and why it has largely exported or donated protective gear, such as masks, as well as
ventilators. The message behind this form of soft power, which has been labeled as Beijing’s Mask Diplomacy, is
quite obvious and has been summed up by the European Union chief diplomat, Josep Borrell, as a ‘politics of
generosity that is hiding ‘a geo-political component including a struggle for influence’ pushing the message that,
unlike the U.S., ‘[China] is a responsible and reliable partner’. Its goal is to convince the Europeans that China is
the only entity offering help in the clear absence of support from the United States, which is becoming more and
more isolationist, and the lack of European solidarity. This narrative has been used by some politicians, such as
Serbian President Aleksandar Vucic. Through these actions and rhetoric,

Beijing is probably not only hoping that this crisis will not harm its trade relations with the European Union,
but that they will become more prosperous and that the threats of regaining control over the production of
strategic industrial goods will never materialize.

SOC SCI 103N – The Contemporary World Page 5 of 9

 Needless to say, maintaining healthy trade relations with Europe is instrumental in Xi Jinping’s greatest
project, the Belt and Road initiative (BRI). Launched In Astana, Kazakhstan, this gigantic project announced in
2013 aims to link more than 100 countries through a wide range of infrastructure projects that would connect
China with Europe, Africa, the Middle East, and the rest of Asia through overland and maritime routes. The project
will cost China between 4 and 8 trillion USD over the course of its completion, which is scheduled for 2049. If it is
ever completed, this project will become a game-changer and will cement the twenty-first century as ‘the Asian
Century’ in history books. First, by physically connecting the world’s largest economy through overland
commercial routes, the BRI will have long-lasting implications on international trade, as the current seaborne
corridors in the Pacific Ocean will shift to the more profitable westward routes, which are faster than sea travel
and cheaper than air travel. Second, it will make Asia the new centre of world trade, as it will physically connect
China with numerous countries through overland routes that are in great need of infrastructure investments.
However, in order to achieve its goal, China needs Europe’s support and collaboration. Otherwise, it will not be
able to export its manufactured goods along the cheaper route. This is why there are reasons to fear that the
protectionist measures that might result from this crisis - whether they are nationalistic or regionalist - could
hamper China’s economic ambitions by creating a new world order with more restraining rules on international
trade. Such restrains will be perceived by China as a direct attack against its economic interests, thereby creating
what Graham Allison has labeled a ‘Thucydides’s Trap’. This theory is based on Athenian historian Thucydides’s
explanation of the war between his city-state and Sparta 2400 years ago that ‘the rise of Athens and the fear
that this inspired in Sparta made war inevitable’. Through an analysis of 16 other conflicts, Allison has found that
war is caused by a combination of two elements: on the one hand, when an emerging power develops a sense
of entitlement and begins asking for a reform of the world system in order to satisfy its demands and, on the other
hand, when the hegemon tries at all costs to maintain it declining power by refusing to alter the status quo in any
way or by undertaking measures that are detrimental to the interests of the rising power. According to Allison, this
pattern caused the bloody war between Athens and Sparta. He writes:

Athens had emerged over a half-century as a steeple of civilization, yielding advances in philosophy,
history, drama, architecture, democracy, and naval prowess. This shocked Sparta, which for a
century had been the leading land power on the Peloponnese peninsula. As Thucydides saw it,
Athens’s position was understandable. As its clout grew, so too did its self-confidence, its
consciousness of past injustices, its sensitivity to instances of disrespect, and its insistence that previous
arrangements be revised to reflect new realities of power. It was also natural, Thucydides explained,
that Sparta interpreted the Athenian posture as unreasonable, ungrateful, and threatening to the
system it had established - and within which Athens had flourished.

When such a pattern occurs - when a ruling state is unwilling to meet the expectations of rising power, the
result is usually war: an outcome that can be triggered by anything once it appears as though the situation can
no longer be dealt with through peaceful channels. When this happens, states are trapped and things quickly
escalate for the worst. This was the case in June 1914 when the heir to the Austrian-Hungarian throne Archduke
Franz-Ferdinand was assassinated in Sarajevo. Despite being a rather unimportant event, it nonetheless served
as an excuse for powers that had been confronting one another for many years (Germany being the rising power
and Great Britain being the declining hegemon) to settle their tensions through war.

For many, the coronavirus crisis may lead to a similar outcome in a context in which China’s ambitions have
been hampered in recent years by measures taken by the U.S. administration that may simply accelerate in the
upcoming months. Indeed, there are no doubts that the crisis will serve as a wake-up call for the general public,
which was unaware of the degree of Western states’ economic dependence on China. If politicians are
consequent with their previous declarations, this will likely result in the repatriation of strategic productions at the
national or regional levels – a decision that will impact China’s economy. The fact remains, however, that
protectionist measures had already been implemented against China prior to the pandemic. The best example
remains the various attempts by the Trump administration to ‘decouple’ the two economies over fears of over-
dependence and spying, namely by starting a ‘tech Cold War’ with China and its companies. By signing an
executive order that restricted the purchase of technology from certain companies deemed a threat to national
security, the US government seriously stripped Huawei of a vast market and its capacity to become a key player
in the field of 5G mobile communications by depriving the company from buying crucial hardware made in the
United States as well as from being able to run its smartphones on Google operating platforms. The coronavirus
crisis may accelerate this trend and lead major computer companies such as Apple, Google, or Microsoft to
move out of China by outsourcing their production in Vietnam or in Thailand. A similar decision to prevent Huawei
from becoming a vendor for 5G networks has also been announced in the United Kingdom, where the Foreign
Minister has also warned that the UK and China will not return to business as usual after this crisis.

While the economic disruptions caused by the coronavirus may lead to an acceleration of the decoupling
of the Chinese and American economies, companies were already considering outsourcing their chains of
production since the Trump administration threatened to implement tariffs on goods produced in China. This has
led American companies to rethink their supply chains, either by convincing their Chinese partners to move
elsewhere in East Asia or simply by opting out of sourcing their production in China. With this sword of Damocles
pending above their head, many companies have already concluded that the risk – meaning the imposition of
tariffs - of producing in China was no longer worthwhile. Thus, China moved from its position as the United States’
first trading partner before the trade war started by Trump to third behind Mexico and Canada. As a
consequence, there has been an increase in imports of goods produced in countries to which companies
SOC SCI 103N – The Contemporary World Page 6 of 9
relocated after leaving China. The coronavirus crisis may simply become the final straw for companies that have
realized how vulnerable their production was in a country that has been plagued in recent years by life-
threatening diseases. As a result, a survey has shown that more and more senior executives of companies now
see the decoupling of the Chinese and American economies as a real possibility, which may grow thanks to the
implementation of various measures, such as Japan’s 2.2 billion USD$ plan to provide direct loans for companies
willing to shift their production back to Japan or elsewhere in East Asia: an idea that has been publicly entertained
by the White House since April 2020.

As stated earlier, whichever form the redefinition of globalization will take, it appears as though China will
be on the losing end, as it will no longer be the factory of the world. In the case of the BRI, the potential creation
of a protected European market may also prevent Chinese companies from acquiring strategic infrastructure -
namely harbours - without which their pharaonic project is doomed. Would this willingness of Western states to
protect their economic interests - while simultaneously hurting those of a rising power - constitute a structural stress
significant enough to confirm China’s impression that the international norm is not representative of the actual
shift in global power? Would the series of humiliating accusations leveled against China and calls for financial
compensation act as a trigger that could initiate a cascade of irrational actions that could lead to war, as was
the case with the assassination of Archduke Franz-Ferdinand in 1914?

This is obviously a concern that needs to be addressed. Are China and the United States actually heading
towards a conflict because of the coronavirus? If we leave aside the severe criticisms Allison’s thesis has received,
especially that of renowned China expert Arthur Waldron, specific points related to the current situation ought
to minimize this fear. Indeed, China’s recent economic shift has already shown that the country had been on a
‘deglobalizing’ trend in recent years, moving to a form of economic autarky by focusing mainly on its domestic
consumption. For China and for many other economies, the Chinese consumer is the primary path to economic
prosperity and has been described by a former Goldman Sachs chief economist ‘as the most important thing in
the world economy, [since] the next 40 years of global growth might be about [him]’. In this perspective, this
health crisis, which will most likely result in more self-dependent national or regional economies, will not clash at
all with Beijing’s willingness to make its economy even less vulnerable to the rest of the world. On the contrary, if
Western countries are trying to sever their economic ties with China, they will simply weaken themselves even
more as Chinese companies will not have the ability to completely dominate the world’s biggest consumer
market. Such an outcome is definitely not a trap that would lead China to engage in war with the United States,
but rather the most desirable outcome for Beijing, as it would not need to rely as heavily as other nations on
international trade, instead generating economies of scale through its domestic market. In other words, far from
creating a path to war, the coronavirus crisis may simply lead to a new world order that will finally play to China’s
interests thanks to the irrational desire of Western states to become self-sufficient, fuelled by a willingness to exact
revenge on the country responsible for the outbreak. This is the main aspect to consider concerning the value of
Allison’s thesis in relation to the future economic relations between China and the United States.

Of course, if we are to think of Chinese economy as it was when the country first opened its borders to
foreign investment, Allison’s thesis would make sense. Indeed, during its initiation to capitalism, China took
advantage of its competitive advantages by positioning itself at the bottom of the global value-chain by
producing and exporting low-income value goods. This model, which was largely based on exporting its
produced goods to an overseas market and on the subsequent huge inflows of international capital, has served
China very well over the last forty years. It has led to the increase of personal wealth, the creation of a middle
class, and the emergence of indigenous businesses. However, this model has come to an end under Xi Jinping’s
leadership as China now has the tools to heavily rely on its domestic market as the main source of economic
growth. Recent years have shown a rebalancing of China’s economy towards its domestic market. As has been
summarized in 2019 research paper:

China’s exposure to the world in relative terms has fallen because the major driver of its economic
growth is no longer trade or investment but rather domestic consumption. In 11 of the 16 quarters
from January 2015 to December 2018, consumption contributed more than 60 percent of total GDP
growth. In 2018, about 76 percent of GDP growth came from domestic consumption, while net trade
actually made a negative contribution to GDP growth. As recently as 2008, China’s net trade surplus
amounted to 8 percent of GDP; by 2018, that figure was estimated to be only 1.3 percent - less than
either Germany or South Korea, where net trade surpluses amount to between 5 and 8 percent of
GDP.

This ‘deglobalization’ of China and its turn towards its domestic economy is the result of many factors,
namely the enrichment of Chinese people, which has allowed a growing number of consumers to devote a
larger share of their revenue to discretionary spending on unessential goods. Moreover, despite the fact that
China’s consumption is theoretically threatened by the country’s aging demographics (a problem multiplied by
the now eased One Child Policy), studies have revealed that China’s elderly population has accumulated a
significant amount of money over the years that will allow them to be self-sufficient during their retirement and
that more than three-quarters of them possess their own property. As a result, middle-aged adults (those aged
between 40 and 60) who have the highest income of all age groups in China will most likely not be financially
pressured to limit their spending on consumption goods and will not play a detrimental role in the growth of
China’s domestic economy in the future. Moreover, as these adults do not have to worry about their parents’
financial security, there is a phenomenon of the downward transfer of financial resources to the members of the
SOC SCI 103N – The Contemporary World Page 7 of 9
younger generation, who are usually supported by their parents when they buy their first apartment and who
can also expect to inherit their parents’ wealth upon their deaths, as well as high-value properties.

The ‘deglobalization’ of China and its turn towards its domestic economy can also be explained as a by-
product of the country’s openness to capital and foreign investments since the 1980s with Chinese patriotism.
More precisely, the presence of foreign companies in a country that had no history of entrepreneurship has led
to the development of home-grown industries that have not only copied the business models, tools, and
approaches of their Western counterparts but have also created similar products, which has led to a steady
decline in the market shares of Western products over time in favour of Chinese products. The perfect example
of this is Huawei and other Chinese companies that have not only replaced other companies as the main
providers of smartphones over the last decade, but that have also started to export elsewhere in the world. This
trend has also hit other domains (although to a lesser extent), such as computers and peripherals, watches, over-
the-counter drugs, passenger vehicles, and video games. Although studies have revealed that Chinese still have
a taste for high-quality goods that are not always produced by local companies, surveys have shown that a
growing number of them are now willing to prioritize Chinese products over foreign ones, irrespective of their
quality. Moreover, China’s self-sufficiency is destined to keep growing thanks to its state’s intervention and to
expand beyond the mere low-value manufacturing sector in which it has been a champion since the 1980s.
Through various initiatives, such as the ‘Made in China 2025’ program, which aims at upgrading China’s
manufacturing basis by making the country a world leader in ten high-tech industries like electric cars, artificial
intelligence, telecommunications, aerospace, and high-end rail infrastructure, China is hoping to become fully
autonomous in every segment of its high-tech supply chain, meaning that decoupling will most likely affect
telecom, Internet, and 5G systems in the upcoming years: a trend that may simply accelerate with the current
willingness of the rest of the world to become more independent from China.

This may explain why China was quite open to the decoupling of its economy from that of the US when
President Trump started a trade war; it was welcomed by both countries as a matter of economic independence.
In fact, as was stated by economist Brad Setser of the Council on Foreign Relations, Xi Jinping has probably
deglobalized more than the United States under the Trump administration. Indeed, imports to China have steadily
declined from the end of 2012 until now, while China’s GDP has grown significantly over the same period, a clear
sign of deglobalization since globalization usually implies a close symmetry between these factors. When we ask
ourselves who serves to gain the most from deglobalization and the decoupling of the Chinese and American
economies, it is obvious that China is the answer. China possesses an asset the U.S. economy does not have: a
domestic market big enough to sustain the offer of their homemade goods produced at much lower costs than
what their American counterparts can produce. For the American companies and government, the sole option
for maintaining the current state of affairs is by being able to either repatriate its manufacturing sector - a very
costly and hugely unrealistic solution - or by encouraging companies to outsource their production from China
directly or indirectly through tariffs, for instance, to other South East Asian countries. However, whichever option
is chosen, this will never compensate for being cut off from the Chinese domestic market - the ‘market of last
resort’ - which is why the respective economic dependency of both powers is clearly not in favour of the United
States. China has therefore no reason to worry about a possible rescaling of globalization at the national or
regional level under the impulsion of the United States or the European Union, as it is a course of action that it has
already embraced.

Of course, what will happen next remains a matter of pure speculation, more specifically concerning what
China will choose to do. Will it stick to an autarkic model within its borders or will it rather try to create a Beijing-
led self-dependent region that will be connected thanks to the BRI? Only time will tell, but the first option does
not appear sustainable in the long run. China’s recent focus on its domestic market can only be an intermediary
phase that must lead to another developmental path. Indeed, sticking to this policy comes with an obvious risk
for China, since domestic consumption may be negatively affected in the event of a crisis of overproduction - a
prospect that is already looming on the horizon. The risk of market saturation is not a novelty in the study of
capitalism, since it had already been identified in the nineteenth century by economist Jean-Charles Sismondi
as one of the main flaws of the system. Because of this risk, China may also follow the already discussed path of
the regionalization of its economic market. In this regard, the BRI may play a vital role and may become the
driving force behind the creation of a China-led regional economic sphere. The realization of this vast project
would serve China’s interests in many ways. First, this would allow China to stimulate its domestic economy
through investments by financing the required infrastructures for this project as well as increasing its potential
markets in the region. More strategically, this would transform China into the regional ‘Good Samaritan’ that
would, thanks to its project, keep afloat the regional Asian economy, which will be severely disrupted by this
health crisis. In this regard, it is perfectly reasonable to expect that the coronavirus crisis will simply accelerate this
project. This is because the region will be in desperate need of a ‘Marshall Plan 2.0’ that will promise to quickly
boost economic growth and job creation once this health hazard has passed, since the world is entering a crisis
that will be much worse than the 2008 financial crisis and maybe even than that of 1929. The advantages are
clear countries that agree to become stakeholders in this project, as it means that China will further increase its
investments in essential infrastructure. In return, this project would further increase the already existing tight trade
links with China through regional supply chains, meaning that China would not only be able to export its goods
to these countries, but these countries might also expect to have easier access to the Chinese market by
exporting goods or raw materials China needs to support its projects whether it is Central Asia’s oil and gas,
Australia’s iron and coal, or Chile’s copper.

SOC SCI 103N – The Contemporary World Page 8 of 9

 If this scenario becomes a reality, there is a risk of conflicts between these new regional blocks, especially
in buffer regions between them. However, the source of these clashes will not result from a declining hegemon’s
willingness to hamper the ambitions of a rising power. They will rather be the result of a world with disentangled
economies that are all fighting to be self-sufficient. This phenomenon started before the COVID-19 outbreak and
may simply be accelerated by it. This of course comes with the same concern … that a lack of interdependence
may lead to political tensions as these countries or regional blocks will have less to lose from an economic
standpoint if they are to fight rather than keep cooperating. In this sense, the post COVID-19 world may resemble
that after 1945, leading to a new Cold War between self-contained economies or, in the words of Kevin Rudd,
former Australian Prime Minister and current President of the Asia Society Policy Institute, ‘the return of an iron
curtain between East and West and the beginning of a new conventional and nuclear arms race with all its
attendant strategic instability and risk’. This is indeed a troubling scenario that could lead to new battles for the
control of buffer territories between regional blocks or to conflicts over natural resources that are essential for the
self-sufficiency of these new entities.

SUMMARY

The Cold War, spanning from the late 1940s to the early 1990s, was a period of geopolitical tension between
the United States and its allies (the Western bloc) and the Soviet Union and its allies (the Eastern bloc). While
primarily a struggle for political and military supremacy, the Cold War also had profound effects on the process
of globalization.

ACTIVITY

Role-Play Simulation

Students will be divided into small groups and each group will be assigned a character role (e.g., U.S.
President, Soviet Premier, Chinese Leader, NATO representative, UN official, leaders of non-aligned nations, etc.).
Groups will then participate in a series of role-playing scenarios that represent critical moments in the Cold War
and their impacts on globalization.

READINGS AND REFERENCES

References
Caron, J. (2021). A sketch of the world after the COVID-19 crisis: Essays on political authority, the future of
globalization, and the rise of China. Singapore: Palgrave Macmillan
Friedman, T.L. (2000). The lexus and the olive tree. New York: Anchor Books.
Nye, J.S., & Welch, D.A. (2013). Understanding Global Conflict and Cooperation: An Introduction to Theory and
History.
Steger, M. (2013). Globalization: A very short introduction. Oxford, UK: Oxford University Press.

NOTICE
All rights reserved. No part of this material may be reproduced, stored in a retrieval system, or transmitted in any
form or by any means – electronic, mechanical, photocopying, recording, or otherwise – without the prior written
permission of the owner.

Prepared by:

MR. JEFFERSON M. DELMENDO

Faculty Member, Department of Political Science
College of Arts and Sciences
University of the Cordilleras
Gov. Pack Road, Baguio City 2600
Benguet, CAR, Philippines

SOC SCI 103N – The Contemporary World Page 9 of 9