Saturday, May 23, 2015

China, the Strategic Mistake of America

China, the Strategic Mistake of America

"The old world us dying away, and the new to come forth; now is the time of monsters" Antonio Gramsci (Italy)

After WW-II, America grew from material foundation of world largest economy, lead the world for 60 years, except bipolar power threat during 1945-91from USSR. Its consistent foreign policy didn't allow USSR to dominate through strategic global alliance of NATO, Japan, S Korea, etc. USSR collapsed in 1991.

But Iraq involvement was one of its biggest strategic mistake  took excessive amount away from American treasure without showcasing achievements. It has cost $3T and lives 10 years. Afghanistan costs $1.5B in 14 years. Now the Anchor is unable to perform as world leader. President Obama is shy to use power. Change in regimes in Egypt, Libya didn't work. Radical Islam, Mujahedin, ISIS are present threats.  Leadership costs very high, may and may not choose leadership role. 

To tighten the screw over Russia, America committed another strategic mistake by allowing China, not an Allie, in WTO in 1991. Chinese dragon was underestimated. China encased the opportunity. With strategic improvement in infrastructures and education and with mass production of merchandize goods it has grew as new world power. It's goods and men-women are flooded in America melting dollars. Even at the tourist spots in USA, all the souvenirs are made in China. All malls and stores are carrying goods of made in China. China become a "manufacturing workshop of the world". Chinese share in world GDP market went down from 33% in 1820 to 5% in 1950, again rose to 20% at present and will reach 25% in 2025. However in value added terms, not the largest compare to EU and USA but its growing economy with massive military modernisation has posed a threat of world leadership over USA. Now America has to further re-look and build its military capabilities to maintain safety trust of strategic allies Japan and South Korea as their economies are interlinked with Chinese economy. 

In the new world of growth with open economy; private capital doesn't recognise State borders and going wherever opportunities of getting maximum rate of return. It can move in and out in seconds.   State role is minimised unless war or emergency, to earn out of economic transactions and use it for strategic development goals (SDG).

Russia, individually can't be a threat to USA but the natural rivals Russia and China have joined hand together to exchange technology and goods put USA under worries of world leadership. 

Where is India? 16% share in world GDP market in 1870, it came down to 4% in 1950, and now grown to 8% at present, expecting to reach 11% in 2025. But India is not a permanent open order economy. USA wants India to part of TPP. It wants to contain China. But free trade agreement between USA-India hasn't taken place. The nuclear deal with USA opened its door for power generation, but liability bill closed the doors. It may now try to solve the problem through administrative order but it will not work unless the law is being amended. India is no where near in defeating China in world trade. Now the mode of war changed. It has shifted from land forces to nuclear or proxy war or economic containment. There is a need for serious defense review. Does it need 35 military divisions to fight war on land borders? Need for a tradeoff between land power and air power. There is need for modernisation and upgrade Air and Naval Forces. China is interested in money making but it will continue claiming territories. It has no interest in resolving border disputes. It will not accept negotiated settlement on Indian terms. And India to think development as part of defense strategy, must maintain high percentage of growth rate. Build human capital will skill degrees. More than productivity, quality of human capital need to be improved to encase demographic dividend of 'Young India'. There is urgency to go for 2nd generation economic reforms as economic growth is a formation of innovations. 

USA is still a major power. It sales technology and designs.  To control Russia, the price of oil went down through USA companies as oil and gas are strength of Russia. Below $110 per barrel is a breakdown condition for Russia. 

Is America tired? Is the hegeman defeat the challenge as feel exhausted at the end of the victory, give a room for new hegemonic power to born?

"The old world is dying, but a new world being born. It generates inspiration from the chaos that beats upon us all" -Cahrlos Bulosan (from America is in the heart)

4 November 2014, WDC


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