OPINION:
America, NATO and our Pacific allies have been dragged into a new era of hostility with a loose alliance of autocratic states: China, Russia, North Korea, Iran and perhaps now Saudi Arabia.
It’s fashionable to obsess about the dangers of a second Cold War, but the emerging multipolar world is hardly a replay of competition with the Soviet Union. In the 1960s and 1970s, the United States enjoyed conventional military supremacy and the clout of by far the world’s richest and most dynamic economy.
America competed with the Soviet Union for influence in the developing world by offering market access, humanitarian aid, development finance and institutional support through the World Trade Organization, International Monetary Fund and World Bank — as well as military support and technical assistance.
When nations fell into financial distress, the United States with its allies could obtain democratic and economic reforms with a virtual monopoly of resources.
Those days are gone. The WTO is moribund, and developing nations whose economies have been wracked by COVID, inflation, food shortages created by the war in Ukraine, and rising interest rates are increasingly seeking assistance that involves the major international institutions, but with China replacing the United States as their major creditor and holding the keys to debt restructuring.
One of the hallmarks of Cold War 2.0 is the emergence players outside the Western alliance and axis of autocrats who enjoy much more significant economic, financial or technological clout. They are either hostile to the West’s democratic values or simply willing to ignore, for example, Russia’s atrocities in Ukraine, China’s surveillance state and its repression of millions of Muslims in Xinjiang, and Iran’s terrorist activities as long as those don’t affect them.
They are transactional to the point of decadence and don’t always see the world in the sharp contrast of good and evil as Western leaders and citizens are more inclined.
A Cambridge University report found that in liberal democracies, 75% of the people hold negative views of China and 87% negative views of Russia. Among the 6 billion living elsewhere, perceptions are almost the reverse.
The upshot, despite three generations of U.S. and European support, is that Israel refused to provide Ukraine with its Iron Dome air defenses. India happily buys more oil from Russia. Saudi Arabia is cooperating with Russia to raise the price of oil, thereby boosting the latter’s war chest. Brazil is forging closer ties with China.
The botched American withdrawal from Afghanistan, reluctance to provide Ukraine with the weapons it needs to avoid stalemate and prevail, and the overreliance of U.S. policy on economic sanctions — specifically to deal with Russian, Iranian, North Korean and Chinese provocations — are inspiring developing and emerging economies to seek alternatives to the dollar for conducting international transactions and backing their currencies.
India and Malaysia have agreed to settle commercial transactions in rupees instead of dollars. Saudi Arabia and the United Arab Emirates are seeking alternatives to the dollar for oil payments. Brazil and China will settle their trade in yuan and real. Indonesia is preparing to phase out Visa and Mastercard in favor of a local payment system.
So far, the overall effects have been small, but should China permit greater convertibility of yuan and provide a secure supply of yuan-denominated bonds, its currency could quickly satisfy nonaligned nations with a significant substitute for the dollar as their primary reserve currency.
At that point, the bite of U.S. and allied sanctions on Russia, Iran and others becomes greatly diminished, and NATO would be forced to rely more on kinetic force to hold back Russian aggression and elsewhere when vital strategic interests are at stake.
But it is hardly clear that the United States — even with the full cooperation and assent of allies — has the military resources to defend Europe’s eastern flank and Taiwan against invasion.
On top of the chilling effect of economic sanctions, U.S. trade policy under Presidents Donald Trump and Biden is decidedly nationalistic and protectionist.
That makes sense as a policy toward China and other autocrats, but to the rest of the world, it makes America look no better than China.
I fail to see how Mr. Biden’s Indo-Pacific Economic Framework or his industrial policies differ much from Chinese mercantilism. We seek concessions on technology standards, climate change and labor practices but don’t offer enhanced access, and we subsidize domestic manufacturing. China is happy to import raw materials and whatever else it can’t make but otherwise does much of the same as Mr. Biden’s version of America First.
All of this does a great job of throwing developing and emerging economies into the arms of the Chinese.
We need to take more risks to defend Ukraine and repel the Russians, fortify Eastern Europe and confront Iran, and recognize that excessive reliance on economic sanctions and protectionism is self-defeating.
• Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.
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