One World, Two Systems: U.S., China Face Difficult Tests Next 12 Months

11 min readNov 10, 2019

Nov 9 — The U.S. and China both will likely face difficult, linked tests of their respective economic/political/social systems over the next twelve months. The U.S. system relies on the “consent of the governed” for its legitimacy and authority, China’s on its economic performance for the same.

So for the U.S., the tests will be what an impeachment of Trump, which now seems likely, and the 2020 presidential election will mean for its “democratic” system and “rule of law.” For China, the tests will be how well the one-party authoritarian system of the China Communist Party (CCP) handles slower economic growth, now at its lowest in decades.

On Sep 25 Beijing opened its modern Daxing International Airport, the day after Pelosi announced the House would initiate its impeachment inquiry of Trump. China can build infrastructure, the U.S. can’t, but unlike China can legally remove its President.

Whether or not these tests will be critical or even decisive will depend a lot on global economic growth. If it continues to slow, then that may make the extremely partisan American political environment even more contentious and place increasing pressure on the CCP.

If another financial/economic crisis were to occur, the world would be in a poor position to deal with it, given already stretched central bank policies, high debt levels, and the lack of global cooperation and coordination.

What happens in the U.S. will impact China, and vice versa. The governing political/economic/social systems in the U.S. and China have been increasingly linked for the past forty years.

Following the previous period of global systemic crises in the 1970s, the elections of Thatcher and Reagan ushered in the era of neoliberal financialization/globalization in the west and Deng began “reform and opening up” in China at the same time, eventually leading to Xi’s “socialism with Chinese characteristics for a New Era.”

The western neoliberal system suffered the severe 2007–09 Great Financial Crisis (GFC) and 2010–12 European Debt Crisis, what I would call the combined 2007–12 Neoliberal Crisis, which has remained unresolved, and that system is now going through political crises in the global bastions of financialization.

I.e., the ongoing three-year crises of impeachment in the U.S. and Brexit in the U.K., which have politically paralyzed both countries, and the current turmoil in Hong Kong, a major neoliberal financial center whose currency is directly tied to the U.S. dollar and the Fed, with strong links to Wall Street and the City of London.

Hong Kong of course is part of China, “one country, two systems,” the latter has not been democracy, which HK never had through 150 years of British colonial rule, but rather rule by financial/real estate business, in a bargain with the CCP. So HK is in miniature a tragic clash of the two superpower systems, as I’ve written about in recent articles.

Though you wouldn’t know it from the western media, China generally has been a relative haven of stability compared with the west both politically and economically during and since the GFC, providing much of the growth and stability of the global economy. It has exercised restraint in Trump’s tech/trade war, and has not intervened militarily in HK.

Whether or not the U.S. and China systems become increasingly “disengaged,” and how each system will deal with the increasingly huge wealth/income inequality that has developed in both, remain to be seen.

With his Marxist sense of history, Xi has said several times that “our world is undergoing profound changes unseen in a century,” i.e. since the Russian Revolution and the founding of the CCP.

Whether or not there will be similar epochal changes also remains to be seen, so far in the U.S. a new ideology has not come to dominate over the reigning neoliberal one, as the latter had forty years ago over Keynesian New Deal liberalism that had prevailed for the previous forty years since the 1930s Great Depression, perhaps it may take another crisis for that to happen, if so, in that sense the GFC was a “wasted” opportunity.

The U.S. stock market, which is at record highs, remains unconcerned about any of this, at least as long as it believes the unelected Fed and other central bankers have its back, and that, as Mario Draghi put it on July 26, 2012, in the context of the ECB response to the European debt crisis at that time, “believe me, it will be enough.”

Will it, should there be further crises? This question has been asked and answered umpteenth times in the mass and social media. And of course no one seems to know, or if they do, they’re not tweeting it.

Political legitimacy in China depends on its economic output “performance,” versus input process legitimacy in the U.S. China is ruled by people who have spent their entire careers going up the party ladder with ever larger governmental responsibilities, who generally have shown pragmatic flexibility in dealing with great economic challenges. The U.S. can be ruled by an “outsider” “populist” like Trump. If the voters, or their elected representatives, feel that was a mistake, they can change it, unlike in China.

I won’t attempt to judge here which “competing” system is “better” or might “win” in the long term, that would be far too speculative at this point. I think the two superpowers are so vastly different that far different systems can work for each, within the context of their own stages of economic/political development.

Perhaps this can be viewed as essentially humanity running different “experiments” of varieties of capitalist systems, trying to see which works well in different historical environments, hopefully without extreme clashes. Unlike in the past, through the internet the lessons and inspirations from those experiments can now be shared globally.

China frequently invokes the “western” 1648 Westphalian view of national sovereignty combined with championing modern-day globalization and multilateral institutions, whereas the U.S. most recently has not. U.S. elites believe its system’s democratic values are “universal,” which the CCP rejects, believing that its system is in sync with Marxist “scientific” laws of development and its very long cultural heritage. The U.S. emphasizes “freedom,” at least in theory, China stability.

The U.S. proselytizes its system far more than China does, and often imposes sanctions on nations and people who it deems breaking its own policies and laws, using its control of the global reserve currency and financial system, which of course other nations resent.

Perhaps the one “universal value” that all successful systems of economic/political development have shared is a strong emphasis on science and technology, initially “western” then adopted by East Asian nations, starting with Japan in the 1870s, regardless of how their systems are organized to facilitate that emphasis. Of course that emphasis is necessary but not sufficient for economic/political/social development, as shown by the now defunct USSR, the debate has been around what else is necessary, with democracy in question, per China and India.

So far in the 21st century China has not yet faced a severe economic downturn at home or a political crisis, unlike the U.S. Over the past forty years its huge growth, though from a much lower base, in per capita income and wealth, unlike the old Soviet Union, is unimaginable in the west, for which China is not given enough credit in western media. Nor for its contributions to global growth and stability since the U.S. has had its GFC, and its disastrous wars in Iraq and Afghanistan.

A political crisis around Trump’s impeachment and/or the 2020 election would further tarnish the U.S. brand of “democratic” “free market” capitalism, the latter for many has meant bailouts for the banks in the GFC and tax cuts for the wealthy under Trump.

If Trump is impeached, which now seems likely, that would be the third time since 1974 that a U.S. president has dealt with such a serious crisis. And twice since 2000 a president was elected without winning the popular vote. Opinion polls show trust in U.S. government to be very low, far below that in China.

Of course China has its issues, which I won’t go into here, my consistent emphasis in my articles the past year is that the U.S. should focus on dealing with its serious issues, not China’s, other than to say American media has been far from unbiased on “reporting” and commenting on them.

Unlike China, the U.S. places great emphasis on its “free press,” usually controlled by large corporations, though most American citizens would probably be quite surprised at how seriously economic issues are openly debated in China, and probably also by the wide extent of consumer choice in China’s highly competitive markets, which often matters more to many, if not most people, than political freedom in both countries. And many if not most Americans get their “news” from highly biased “echo chambers,” both “left” and “right,” in mass and social media.

Hopefully the 2020 U.S. election campaigns will generate more light than heat. A serious debate over issues is emerging, at least within the Democrats, especially over Medicare for All, strengthened by Warren’s propensity to issue detailed policy proposals. Whether that continues through the general election remains to be seen.

The Democrats’ debates have mainly revolved around redistribution issues, with very little on economic growth and science/technology, unlike in China, which still needs to get past its “middle-income trap” and has been pivoting toward higher quality growth based on advanced technology, e.g. 5G and AI, which some American elites find threatening. The exception in the U.S. being climate change, where science is invoked, though views on the cost and technology issues are heavily impacted by appeals to emotions and ideology.

Several times in the past four years I have called for serious debates between bona fide experts on key issues. I’m not naive enough to think that what would appeal to the electorate, but hopefully it might have some impact on actual policy decisions. I have been naive enough to even suggest that Facebook and Bloomberg, among others, help to sponsor such debates.

China’s system has such debates, but the key ones are behind closed doors, internal within the CCP, and highly constrained on sensitive political issues, and once an issue is decided, Leninist “democratic centralism” does not allow for much dissent.

In the U.S., policy issues in elections are less factual and more emotional. American policy issues do play out on op-ed pages of a few major publications, policy and academic journals, and Twitter and other social media, but often with marginal impact on actual policy, legislation and regulation, which are usually heavily influenced, even written, by big money corporate lobbyists, also behind closed doors.

E.g., many, if not most. tweets from experts on Twitter are “virtue signaling” within their own ideological silos, on both sides of the ideological spectrum. It’s very rare that experts with differing views actually debate issues on Twitter without it quickly degenerating, even when they would seem to be on the same team, e.g. on fiscal policy and deficits.

In the U.S. the reputation of expert opinion was severely compromised by the 2003 invasion of Iraq and then the 2007–09 GFC, which has contributed to the rise of “populist” politicians like Trump. China has yet to make comparably large mistakes.

The U.S. is not going to change the CCP or China, it is too large, as by now should be obvious in Trump’s tech/trade war, which has accomplished very little so far, even if a Phase 1 deal is reached, which would mainly get U.S. agricultural exports back to where they were before Trump’s war started, for his political purposes, and help Wall Street access to the China market.

Trump’s China tech/trade war hasn’t and won’t create new American manufacturing jobs, which have been declining in key midwest swing states for Trump. The U.S. has been de-industrializing and eviscerating its labor unions for fifty years, initially in response to the rapid recovery of Germany and Japan from their WW II devastation, long before China joined the WTO in 2001, which accelerated the process.

But China didn’t steal American jobs, U.S. global companies moved them there, responding to the carrots (CEO stock options, leveraged buyouts) and sticks (hostile takeovers) of Wall Street.

Expert opinion has had little impact on Trump’s tech/trade war, he seems to mainly get his news and views from Fox television and his circle of business friends. Some expert economists, including prominent long-time critics of some aspects of globalization like Rodrik and Stiglitz, recently posted a joint statement on the issue, China experts posted on Open Letter on July 3, see Further Reading at the end.

Western scholars of international relations, who tend to under-emphasize economic and technology issues in favor of national security ones, though of course all are different sides of the same rubik cube, are wrestling with the return of “great power competition,” and whether or not it will be peaceful.

The one area in which “expert” opinion has dominated in the U.S. is in monetary policy, run by the unelected officials of the “independent” Federal Reserve, in part due to the inability of highly partisan politicians to conduct rational fiscal policies. “Experts” also run the Supreme Court, appointed for life. In contrast, the CCP has far more policy levers and control over them.

The U.S. economy now has gone ten years without a recession, but growth has been very slow since the GFC. Financial markets have done very well, but the resulting wealth/income inequality is extreme, which has resulted in proposals for wealth and other taxes being debated by the Democrats.

For now, financial markets are not too concerned about that and continue to believe that the unelected Fed will always have their backs, when push comes to shove, which has strongly contributed to the massive income/wealth inequality in the U.S.

Will any of this change in the next twelve months? I’m skeptical that the U.S. will be able to overcome its divisiveness created over many decades of “culture wars” from “the right” and politically correct “identity politics” from “the left.” China will continue to build infrastructure and many other things, while Americans fight among themselves, especially in the media, but also with unacceptably high violence and declining life expectancy not seen in any other developed nation.

The result of this divisiveness, which is often deliberate, is that Americans now feel they are two-thirds of the way to a civil war, according to a new poll. Again, as I’ve emphasized the past year, hopefully the U.S. will focus on fixing its own house over the next twelve months. Americans badly needs to regain their sense of social purpose and progress, which many in China evidently still seem to feel due to its very strong economic growth the last forty years, regardless of what you might think about the CCP.

MAWA, Make America and World Awesome

John Furlan

One World, Two Systems: U.S., China Face Difficult Tests Next 12 Months

Written by John Furlan