After months of back-and-forth debate by Democrats, President Joe Biden’s $1.2 trillion infrastructure bill was finally approved by both houses of Congress last week. (Congressional Democrats continue to hash out Biden’s bigger social welfare and climate change bill.) The two domestic agenda measures are the current administration’s latest attempt in its stepped-up competition with China.
Rebuilding our national infrastructure, exporting COVID-19 vaccines to Third World countries, building or renewing alliances with other democratic countries: All of these initia- tives are part of Biden’s strategy in getting the U.S. to compete with, and win global support away from, China.
During the past several years, U.S.-China relations have descended into an ever-more adversarial feedback loop with little end in sight. Is there a way out? Prospects certainly look dim.
A tit-for-tat trade war rapidly escalated after U.S. President Donald Trump began to levy tariffs and other trade restrictions on China in 2018. Even after the “Phase One Trade Agreement” was reached in January 2020, tensions between the world’s two largest economies persisted.
Neither did a new administration in the White House deliver respite, with Biden’s bold announcement in wanting to compete economically against China.
On both sides of the Pacific and beyond, a new economic statism is well and alive. Neo-liberal laissez-faire ideology, in contrast, is finding fewer and fewer adherents, especially among politicians. Both on the left and right of U.S. politics, economic populism is the new mantra.
Although Beijing never fully bought into the laissez- faire economics so adamantly preached by Washington in the 1990s, key aspects of Chinese reform were deeply influenced by market liberalism. Much of what Chinese reformers did in the early years was to get the state and bureaucrats out of the way to give markets greater sway, while allowing private enterprise to grow.
By the time Chinese president Xi Jinping came to power, disillusionment with laissez-faire economics was on the rise. Economic policy-makers in Beijing grew increasingly disenchanted with the policy objective of simple market liberalization.
They became convinced that for markets to work in the interests of society, government had to step in. A new policy goal emerged: to strengthen state oversight of marketization and technology development in the country’s economy.
This turn to increased government economic intervention and influence is not only confined to China. In an ironic twist, the Biden administration’s signature domestic initiative, the “Build Back Better” infrastructure bills, mirror what is happening in China.
The bipartisan $1.2 trillion infrastructure bill passed by Congress, and set to be signed by Biden Monday, also sees Washington playing a much more forceful role in the American economy, including technology development, industrial policy and more traditional infrastructure (i.e., roads and bridges).
Xi Jinping’s recent claims of seeking “common prosperity” for all Chinese further encompasses efforts to create a fairer and less unequal society. While some of the policy approaches are different, Biden’s social agenda has exactly the same goals.
Biden’s infrastructure measures could benefit Hawaii’s economy by creating more construction projects and jobs until the tourism industry gradually regains its footing. (It’s unclear whether any of the funding would go toward Honolulu’s beleaguered rail project.)
In the meantime, also expect Hawaii by being in the middle of the Pacific to remain an important military installation with heated tensions between mainland China and Taiwan. The U.S. remains on stand-by alert with potential intervention into the situation if things flare up.
Despite the rocky relations between the two superpowers, perhaps better mutual understanding in certain issue areas could help ease some of the tension.
Recently, there have been some positive indications of resuming dialogue on the economic relationship.
Washington and Beijing could stake out some common ground by recognizing this global shift toward a new statist economic philosophy. Many of the policies Washington is proposing to counter Beijing, such as new industrial policy programs, are exactly what American policymakers have chided Beijing for. An open-minded, pragmatic and less ideologically tainted understanding of the two economies could perhaps yield a foundation for more effective dialogue and even cooperation.
Regrettably, the ever-more adversarial tone characterizing the relationship between the United States and China is likely to continue. Continual tensions over Taiwan remain, along with starkly differing ideological orientations. Hope remains low for an open dialogue on how to manage economic competition between the two largest economies on Earth.
Christopher A. McNally is a professor of political economy at Chaminade University and an expert on U.S.-China relations.