In the late 1980s, I was a member of a group called the Friends of Hong Kong. We were trying to see if there was any chance of negotiating a better deal for the territory as the date of its prospective return to China approached. By happenstance, I had a friend who had known Reagan during his time as governor of California, and my colleagues asked me to enquire through him whether there was any chance of the us being willing to apply pressure to help in this effort. The contact worked, and the answer was unequivocal: there was no chance at all, as doing so would risk damaging American business interests in China.
From today’s vantage-point, this does not seem so surprising. More than twenty years ago it was unexpected, at least in its frankness and clarity. The balance of forces in the world appeared already to have changed. It had not been difficult in the 1970s, if one knew something of China’s economic history, to foresee the likelihood of an impressive surge of growth if the political controls on the economy were somewhat loosened and economic interaction with the developed world made easier. I put my prediction into print in 1973 at the end of The Pattern of the Chinese Past, and got this part of the future largely right.footnote1 What I did not foresee at all was the way in which us business would rapidly become dependent on outsourcing much of its production to the prc in order to remain competitive; the way in which American consumers would become bulk-buyers of China’s often not-very-wonderful products; and the extent to which the us government would come to rely, critically, first on Japanese and then, more and more, also on Chinese government-backed purchases of Treasury bonds to handle its increasingly huge debts; and would—in the process—lose much of its freedom of action.
The motivation driving Giovanni Arrighi’s Adam Smith in Beijing is to examine why this seems to have happened. It is a work of striking sweep—historically, geographically, theoretically. Drawing on the insights of Smith, Marx, Schumpeter, Braudel and Arendt, it encompasses debates around the onset of industrial-capitalist development in Europe, and the ‘great divergence’ with the East, as well as the twentieth-century emergence of the us as hegemonic world power and the twenty-first-century challenge of China. Arrighi’s starting point is Smith’s lament, in The Wealth of Nations, that ‘for the natives’ the potential benefits of international trade resulting from the discoveries of the East and West Indies had been ‘sunk and lost in the dreadful misfortunes’ which the latter had occasioned for them, since the Europeans’ military superiority ‘allowed them to commit with impunity every sort of injustice’. Arrighi’s book is informed by sympathy for those on the receiving end of these injustices; and he at least hopes, though he does not assume, that China’s rise might signal the advent of a more equitable world order.footnote2
In what follows I first examine the assumptions on which Arrighi’s arguments rest and then outline his discussion of the us’s present hegemonic status. There follows an interrogation of his historical account of the divergence between Western Europe and China, and the role played by science-based technology in creating and cementing the former’s industrial and military advantage. Finally, I discuss Arrighi’s analysis of the decline of America’s hegemonic power in recent years—and the economic and environmental pressures likely to frame both Washington’s and Beijing’s future actions.
Near the outset, Arrighi states that the ‘central argument’ of his book is based on the premise that East Asian economies, in the centuries immediately before the modern era, followed ‘a market-based Smithian dynamic’ that was ‘labour-intensive [and] energy-saving’, and thus qualitatively different from ‘capitalist development proper’ which was ‘capital- and energy-intensive’.footnote3 Further, capitalist growth was also environmentally destructive, whereas its Asian counterpart was not. Following Kaoru Sugihara, he sees the key to a sustainable economic future for both East and West as lying in some sort of fusion of the two.
Readers may find that the assumptions involved in this formulation, though suggestive, are not uncontroversial as regards their validity. The empirical foundations that might sustain them, however, have not been supplied. Furthermore, the terms of the comparison present a series of difficulties. Firstly, the main differentiating factor between the two regions in the eighteenth century is not discussed. This was the possession by the West of, on the whole, superior technological skills, most of which were constantly being refined by an ever-improving science. These advances were followed, after a time-lag, by the export to various parts of East Asia, at very different speeds, of at least some of the productive capacities they provided. This transfer of technology, taken together with particular socio-political factors, mainly explains why some areas, such as the more advanced regions of Japan and the Chinese-run section of the economy in Shanghai, had probably begun to close the gap in per capita output as early as about 1900.
Although Arrighi does not take this approach, ‘capital investment’ can sometimes look like a workable analytical proxy for increasingly science-based techniques, and such science-related investment is indeed more commonly than not a necessary condition for full economic development and the full use of new economically relevant knowledge. There would seem, though, to be some grounds for fearing flaws in any analysis if this proxy approach is adopted—most importantly, because the cost of diffusing such skills and knowledge elsewhere is usually much lower than the cost of the original combination of invention and innovation. It is possible, in the case of the recipients, for there to appear to be lower capital intensity than is, overall, historically the case.