How the past elucidates the future of the ‘Second Cold War’

How the past elucidates the future of the ‘Second Cold War’

Is the US destined to enter a Thucydides Trap with China? Following the signs of economic decoupling between the two superpowers and the cracks in the globalized economy, which paradigm is better fit to own the future? Multilateral comparison between them seems inevitable.

The field of comparative economics originally involved studying the differences between the socialist – followed by the USSR – and the capitalist – followed by the USA – economic systems. The end of socialist economies prompted a shift of focus towards comparative institutions and culture (individualism and collectivism). The verdict of history was clear: Locke had prevailed over Marx.

The meteoric rise of China thus constituted a puzzle. It lacked the institutional structure based on the rule of law; instead, its authoritative ruling party combined a capitalist economy with a communist regime. To make sense of this conundrum one has to go back into China’s history. Xi’s authoritarian paternalism presents a striking resemblance with China’s imperial past. All land belonging to the emperor, the lack of private property meant even high-ranking officials could not bequeath any to their offspring.

Comparing Chinese history with that of other countries, one distinguishes two institutional systems in the antiquity. Statist systems lacked private property of land and slaves, both belonging to the government. Their legal systems, fostering rule by law instead of rule of law, were instruments of control on behalf of the government, listing prohibitions in behavior towards the government and harsh corresponding punishments. Τhe result resembled a centrally planned economy, in cases like ancient Egypt and China. On the other hand, market systems boasted private property and markets, as well as strong social stratification. The result, prevalent in states like ancient Greece and Rome, was a market-oriented economy.

Countries with previously statist systems tend to develop more collectivist cultures. Collectivist culture sees individuals as embedded in a community and emphasizes conformity, adaptation and harmony; the individual is malleable and can be made to adjust. Historically market states have favored more individualistic traits. Individualist culture places individuals at the center, values individual rights and freedom, opportunity and standing out; the individual is not malleable and has innate traits.

Ancient institutions and cultural values were formed hand in hand and have significantly affected today’s institutional, cultural and economic landscape. China’s “One Belt One Road” initiative and the “American Dream” both result from these long processes. The newly formed field of comparative economic history can shed light on the questions we face and help us make sense of a daunting future. The words of Winston Churchill, “the farther back you can look, the farther forward you are likely to see,” could hardly be more accurate.

Gerard Roland is the E. Morris Cox Professor of Economics and professor of political science at the University of California, Berkeley, and Nikolas Neos is an economist.

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