History also provides us with many instances in which low-level "trade-based" conflicts between nations enabled the less dependent nation to achieve a clear political goal. Consider the days before the U.S. invasion of Iraq, when the Bush Administration convinced China to shut off the flow of oil to North Korea in order to shut up the increasingly belligerent regime in Pyongyang. Or consider the infamous grape scare of March 1989, when the United States cut off all imports of fruits and wine from Chile after "finding" minute traces of cyanide in two grapes, an act that many believe provided the final push needed to get the Pinochet regime out the door.
The question here, of course, is whether China might be able to force the United States to give way on some vital political issue simply by shutting its borders, or by merely threatening to blockade Taiwan, or by picking off in detail the multinational firms that serve both nations. The utopians see industrial interdependence leading inevitably to compromises that leave all parties happy. They see, in other words, positive political cooperation being forged by the forces of economics. Yet what the present form of industrial interdependence with China might actually yield is a system that enables Beijing to engage in carefully calibrated coercion of the United States.
Finally, we must also keep in mind that even if both Washington and Beijing define rational action in the exact same way, there always remains the possibility of irrational politics. Imagine another uprising in China like the pro-democracy movement in Tiananmen Square in 1989. The last time Chinese citizens marched for freedom, Americans watched on CNN, isolated physically from the grand human drama far away. The next time Chinese citizens take to the street, the industrial interdependence forged in the years since will ensure that Americans get to participate directly, at least if the protests disrupt our common industrial system.
One of most disturbing scenarios is to imagine how Americans might react should protests in China result in hardships here at home. Even though a demand by Chinese citizens for greater democracy would resonate strongly with American citizens, our reliance on China for basic goods might lead to equally strong demands to protect the status quo. So even though unregulated trade was sold to Americans as a way to help liberalize politics in China, the actual outcome might well be that the United States ends up supporting Beijing hardliners in their efforts to quash pro-democracy protests. The political dynamics at home may give the U.S. government no other choice.
IT IS NOTHING short of astonishing to compare how we as a nation manage our industrial system--which provides us with our medicines, our processed and packaged foods, the machines we need to live--with how we manage the other two great global systems of finance and energy, where state and semi-state institutions play vital roles in ensuring that the systems are stable and politically safe.
In the energy system, the prime goal remains unchanged from when Winston Churchill declared nearly a century ago that "safety and security in oil lie in variety and variety alone." For proof of the wisdom of this policy, we need think back only as far as September and the devastating blow dealt by Hurricane Katrina to the oil pumping and refining capacity located in and near the Gulf of Mexico. At the worst moment after that immensely destructive storm, U.S. citizens could still count on receiving 90 percent of their normal supply of gasoline, just as proved true when the flow of oil from Venezuela was cut off in 2002.
When we look at the global energy system, almost all of us do so through the eyes of pragmatic realists. We study interdependencies in the system in minute detail to understand how they might affect not only interstate power relations today, but those of the future. Remember that the debate over CNOOC's attempt to purchase Unocal's concessions in Asia focused entirely on interdependencies that affected the United States only indirectly.
Which makes it hard to understand how so many hardliners in the world of energy could pay so little attention to the fact that control over the framing of our nation's industrial strategy has been captured by a group of radical and deeply Pollyannaish internationalists whose beliefs about how nations interact politically can make Norman Angell look like Alfred Thayer Mahan.
There will always be certain among us who believe that the economic benefits of a hyper-specialized global system outweigh the risk of a major supply shock due to a natural disaster or political crisis (even though a single recalibration of the dollar-yuan exchange rate could eliminate all of the accumulated economic benefits overnight). There will also always be certain among us who believe that any factor that steers us away from armed conflict with China justifies accepting extreme restrictions on U.S. freedom of action (even though the two nations share absolutely no political framework within which to manage a deeply interdependent economic relationship).
For every other American, however, the most immediate challenge is to understand the degree to which the radical laissez faire policy of the last 15 years has imperiled the independence of our nation and has undermined the stability of the entire global industrial system.
Once we've swallowed this rather large fact, the next steps will become clearer. Specifically in the U.S.-Chinese relationship, the goal must be to limit how much our nation relies on capacity located within their borders (or potential borders) for our everyday supply of products, components, commodities and services. This does not mean insisting the activity be repatriated, but that the bulk of the capacity--say 75 percent, at least--be located always in supplier nations outside the reach of Chinese authorities or Chinese arms.
If anything, the idea of limiting U.S. reliance on industrial capacity in China might provide a guide for managing our import dependencies generally. After all, although the relationship with China is by far the most troubling, in the long term it is nearly as unwise to allow nations like South Korea, Taiwan and Japan to capture complete or nearly complete control over the global capacity to manufacture any keystone industrial component or product. In this sense, the goal of safely distributing industrial capacity around the world would serve as a sort of principle by which to shape the creation of a "next-generation" global system. Although such distribution would clearly entail some initial costs, these would prove to be a relatively minor part of the final price of most products now sold on the U.S. market (and indeed might prove to be far less costly than a sudden rise in the value of the yuan). And this investment in new and distributed capacity would yield numerous benefits in addition to greater national security, including more innovation, more growth over the long term, and far more true economic freedom for most of the firms, individuals and societies that contribute to and rely on these systems.
Our guiding vision then should be of a complex and multinational system, in which no single political or natural disaster could ever knock down the new global industrial commons on which the United States--and to some degree all industrial nations--now depend. This is a vision that can only be enacted by the state; not only do today's firms lack the ability to identify physical risks to the system, the magnitude of the task has long since outgrown the ability of any one firm or industry to reorder on its own. It is a vision that will require leadership by the U.S. government; the world's other great industrial states are drifting ever more toward policies of mercantilism and protectionism that are only further distorting and destabilizing the current global system.
The meaning of Andrew Grove's words is clear. We have lived through a revolutionary transformation in the world's industrial system--and hence through a political revolution--and never even noticed. We must wake now from the utopian delusion of the last 15 years, which has carried us with phenomenal speed to the edge of economic and political catastrophe. The time has come to relearn how to manage this system on which our nation depends like rational, reasoning, pragmatic human beings.
Common sense--and the most fundamental interests of the United States--demand nothing less.
1. Toyota developed the "just-in-time" or "lean" system of production in the early 1950s as an alternative to the "mass production" techniques then common to most U.S. industries. The lean production model aims at the flexible use of machines, the almost complete elimination of inventory, and reliance on single outside sources of supply located near the main assembly plant. In the 1980s many U.S. firms began to adopt the Toyota system and also to adapt it, most dramatically by extending the system across national borders.
Barry C. Lynn is author of End of the Line: The Rise and Coming Fall of the Global Corporation (2005). He is a senior fellow at the New America Foundation.Essay Types: Essay