Francis Fukuyama writes: As 2016 begins, an historic contest is underway over competing development models – that is, strategies to promote economic growth – between China, on the one hand, and the US and other Western countries on the other.
Most Westerners are aware that growth has slowed substantially in China, from over 10% per year in recent decades to below 7% today (and possibly lower). The country’s leaders are seeking to accelerate the shift from an export-oriented, environmentally damaging growth model based on heavy manufacturing to one based on domestic consumption and services.
President Xi Jinping’s One Belt component consists of rail links from western China through Central Asia and thence to Europe, the Middle East, and South Asia. The strangely named One Road component consists of ports and facilities to increase seaborne traffic from East Asia and connect these countries to the One Belt, giving them a way to move their goods overland, rather than across two oceans, as they currently do.
The China-led Asian Infrastructure Investment Bank (AIIB), which the US earlier this year refused to join, is designed, in part, to finance One Belt, One Road. But the project’s investment requirements will dwarf the resources of the proposed new institution.
Indeed, One Belt, One Road represents a striking departure in Chinese policy. For the first time, China is seeking to export its development model to other countries. One belt’s purpose is to develop industrial capacity and consumer demand in countries outside of China. Rather than extracting raw materials, China is seeking to shift its heavy industry to less developed countries, making them richer and encouraging demand for Chinese products.
China’s development model is different from the one currently fashionable in the West. It is based on massive state-led investments in infrastructure – roads, ports, electricity, railways, and airports – that facilitate industrial development. American economists abjure this build-it-and-they-will-come path, owing to concerns about corruption and self-dealing when the state is so heavily involved. In recent years, by contrast, US and European development strategy has focused on large investments in public health, women’s empowerment, support for global civil society, and anti-corruption measures.
China’s infrastructure-based strategy has worked remarkably well in China itself, and was an important component of the strategies pursued by other East Asian countries, from Japan to South Korea to Singapore.
The big question for the future of global politics is straightforward: Whose model will prevail? If One Belt, One Road meets Chinese planners’ expectations, the whole of Eurasia, from Indonesia to Poland will be transformed in the coming generation.
There are important reasons to question whether One Belt, One Road will succeed. Infrastructure-led growth has worked well in China up to now because the Chinese government could control the political environment. This will not be the case abroad, where instability, conflict, and corruption will interfere with Chinese plans.
Indeed, China has already found itself confronting angry stakeholders, nationalistic legislators, and fickle friends in places like Ecuador and Venezuela, where it already has massive investments. The strategy of massive infrastructure development may have reached a limit inside China, and it may not work in foreign countries, but it is still critical to global growth.
The US used to build massive dams and road networks back in the 1950s and 1960s, until such projects fell out of fashion. Today, the US has relatively little to offer developing countries in this regard. President Barack Obama’s Power Africa initiative is a good one, but it has been slow to get off the ground; efforts to build the Fort Liberté port in Haiti have been a fiasco.
The US should have become a founding member of the AIIB; it could yet join and move China toward greater compliance with international environmental, safety, and labor standards.
