Commentary: Future Opportunities in an Era of Great Upheaval
By Zhou Qiren
Ready or not, we must face this great upheaval. What is this upheaval? We can say it is a major change in the landscape of global competition. The most fundamental part of this is the change in the U.S., because America’s changes have a significant global impact and a particularly important influence on China’s development. China’s path of peaceful development and reform and opening-up was inseparable from the easing of Sino-U.S. relations from confrontation around the end of the Cold War. China seized the historic opportunity brought by that global shift.
In Oct. 1978, the U.S. and China had not yet established diplomatic relations when Zhou Peiyuan, then president of Peking University, was ordered to lead a delegation from the China Association for Science and Technology that reached 11 oral understandings with the U.S. National Science Foundation on sending students abroad. At the end of 1978, the first group of Chinese students arrived in America. In Jan. 1979, this oral agreement was formally signed during Deng Xiaoping’s visit to the U.S. In July 1979, the two countries reached an agreement in Beijing for reciprocal most-favored-nation trade status, opening their markets to each other. Although it required annual review, this reciprocal trade agreement endured through many storms until the U.S. granted China permanent most-favored-nation status in 2000, after which China formally joined the World Trade Organization (WTO). In Oct. 1992, Huachen China (CBA) was listed on the New York Stock Exchange, issuing 5 million common shares at an IPO price of $16 per share. It was 85 times oversubscribed, raising more than $70 million, and its stock price surged 25% on the first day of trading. I have looked through that prospectus, and on its cover, risks were disclosed in small print, including that the company’s home country had experienced a Cultural Revolution and that private property could be confiscated.
I first visited the U.S. myself in 1988, at the invitation of the Chinese Economists Society, along with several others to brief overseas students on China’s domestic reforms and development. Only after arriving did I realize there were so many Chinese students at American universities. The following year, by a fortunate coincidence, I was able to be a visiting scholar at several American universities and then enrolled at UCLA. At the time, my salary in China could not possibly cover the cost of studying in the U.S.; I relied entirely on securing scholarships that American universities offered to foreign scholars and students. My personal impression at the time was that Uncle Sam was unquestionably wealthy and developed, and also very generous. I met many Americans who generally did not have the bad habit of looking down on people from poor places.
In hindsight, the 1990s were America’s postwar peak — the history of the U.S.-Soviet struggle since 1945 “ended” with the collapse of the Soviet Union and a complete American victory. The question is, after reaching its peak, what could America do? Besides looking back and indulging in self-admiration, the only way left was probably downhill. The logic is simple: a peak is always a watershed, with no exceptions for anyone.
Since the 1990s, many people, including some Americans, feel they no longer recognize their country. In 2016, I visited Columbia University and, after reading several reports on the “Rust Belt,” I took some time to drive to Pennsylvania to get a feel for the place myself. I saw a behemoth steelmaker, its massive machinery and equipment left to rust in place, too formidable to dismantle. This was a blue-chip company that had supplied the deck for America’s first aircraft carrier and the steel for San Francisco’s Golden Gate Bridge! These points of rust are not just one or two; they connect to form a larger area, creating the new economic-geographical concept of a “Rust Belt.”
The popular view is that high U.S. labor costs and cheap Chinese labor, once two-way market access was opened, led to massive quantities of Chinese goods being sold in the American market and massive American investment entering China, constituting a major cause of the Rust Belt. I once believed this explanation, but counterexamples exist. Places with higher per capita GDP and wages than the U.S. did not rust away due to China’s economic rise. Switzerland, for example, has a per capita GDP as high as S$100,000 and wages higher than in America. When I asked in Geneva a few years ago, Switzerland’s unemployment rate was only about 1%, and workers from several surrounding developed European countries crossed the border every day to work there. What is the reason for that? The impact of cheap labor from globalization on developed economies is one aspect, but are there appropriate measures to cope with the shock? More generally, all early industrial economies face the challenge of aging technology and rising competitors. Without an effective response, no one can guarantee that a forerunner will enjoy permanent prosperity. In the 1990s, Shanghai still had 500 traditional textile factories. Under the assault of the late-mover advantages of places like Zhejiang and Guangdong, large numbers of Shanghai textile workers were laid off and factories were restructured en masse. At the time, I participated in a local investigation of re-employment experiences. It was a matter of “ruthless adjustment, compassionate operation”— restructuring policies were introduced for Shanghai’s old textile industry, focusing on retraining young and middle-aged workers for new jobs while developing Shanghai’s emerging industries. It took several years to overcome the difficulties. Guangdong is not considered an old industrial base, but the industrial capacity it developed after opening up started early and also became outdated early. It has relied on wave after wave of “emptying the cage for new birds” to achieve wave after wave of industrial upgrading.
Looking at the U.S. from this perspective, the problem is not that old industries are being hit by new forces, but whether the economic system can mount a concentrated response to the challenge of “first-mover turning laggard.” It’s hard to believe that the U.S., as the world’s largest economy, would lack the capital to revitalize its domestic industries. America’s problem is that it has squandered too many resources maintaining its global hegemony. It has overextended itself across the world. It is clearly a Western Hemisphere country, yet it insists on meddling in all the affairs of the Eastern Hemisphere. Its “long-arm jurisdiction” is very satisfying, but it is increasingly overstretched, resulting in its own domestic problems being postponed and becoming intractable. The Rust Belt is just the tip of the iceberg; the subsequent economic and social troubles have become more and more outrageous.
After the pandemic ended in 2022, I went to Silicon Valley with a corporate study group. We landed in San Francisco and had lunch at Union Square. I couldn’t believe this was the city center of the “World’s Best City” as ranked by Time Out in 2021: almost all the shops were closed, with only a few Chinese restaurants open, having to board up their doors and windows to serve customers discreetly. The streets were full of homeless people. Robberies under $99 were not prosecuted, leaving malls and hotels no choice but to shut down. Then there were the two wildfires in Los Angeles at the end of last year, which destroyed over 100 homes. The Malibu fire was just over 10 kilometers from UCLA, where I studied. I emailed a professor of mine who lived there to ask about his situation. His reply: “All that’s left of the house is a chimney!” It’s not that developed economies don’t encounter natural disasters, but for a luxury area like the Palisades to burn for nine consecutive days before the eyes of the global television news, with reports that “there was not a drop of water in the fire hydrants” and no one could do anything about it, doesn’t this offer a glimpse of the true color of America’s social governance capacity?
Yes, Uncle Sam is increasingly overstretched. In 1945, at the end of World War II, the U.S. economy accounted for 50% of the world’s total. That was the result of the European powers’ national strength being exhausted in the world wars. The postwar world order had to be led by America. The U.N. headquarters is in New York, the World Bank and the International Monetary Fund are in Washington, and the dollar became the world’s primary reserve currency. Forty-five years later, the Soviet Union, America’s rival for supremacy, collapsed, and the U.S. became the sole global superpower — though that wasn’t because America was the most beautiful, but only because its rivals were uglier by comparison. By 1990, the U.S. economy’s share of the global total had already fallen to less than 30%, but its global responsibilities had reached their peak. Looking at the trend since then, America has been on a downhill path, increasingly overextended. The peak is indeed the watershed — is history just as unforgiving to the country that was once a beacon on a hill?
In 2024, what is the U.S. economy’s share of the world total? A mere 26%. If measured by purchasing power parity, America’s share is even lower. Today, Donald Trump faces two large accounts: a $1.2 trillion annual trade deficit and a $36 trillion fiscal deficit. Experts have long explained that there is a deep, systemic connection between the U.S. trade and fiscal deficits, and resolving them would have chain reactions. Without changing course, the U.S. economy is unsustainable. The practical question is, how can a country that cannot even manage its own domestic affairs properly continue to reach out and manage the whole world, continuing to play the role of the global hegemon formed between 1945 and 1990? Regardless of what others think, will the American public agree to it?
Observing from the sidelines, the meaning of “America First” is that “America must prioritize solving its own problems.” This slogan was not invented by Trump. Since President Washington’s Farewell Address, the tradition of “isolationism” has been embedded in American political thought. In 2003, while I was a visiting scholar at Yale Law School studying the evolution of the American land system, I also learned some campus anecdotes. Besides Irving Fisher, renowned for his theory of interest, another unforgettable figure was Douglas Stuart. He was an undergraduate at Yale in 1940-1941 who took the lead in launching a nationwide political movement against American involvement and intervention in the European war, founding “The America First Committee.” Although history shows that great powers are inevitably drawn into world affairs, “putting one’s own house in order first” is a commonsense principle of governance. After all, the president of the U.S. is the president of the U.S., not the world president, and certainly not the president of humanity. If priorities are misplaced and a major deviation occurs, American political logic must eventually swing back to tradition.
Seen this way, the post-World War II global structure is no longer sustainable. On one hand, the U.S. can no longer support such a world order; on the other, more and more countries outside the U.S. are increasingly unwilling to accept continued American hegemony. This trend is crystal clear. Regardless of how differently it is understood, the evidence provided by reality for this trend emerges almost daily.
What is less clear is what kind of new structure this global upheaval will evolve into. There are various theoretical deductions, one of the most influential being the “Thucydides Trap.” This deduces the future from grand history — when a reigning power is caught up to by a rising challenger, “war becomes inevitable.” Thucydides was an ancient Greek historian who studied why the Peloponnesian War broke out between the two major city-states of ancient Greece, from which he derived the theory of this trap. Contemporary Harvard academic Graham Allison collected 16 similar cases from the last 500 years where a reigning power was challenged by a rising one. He found that war broke out in 12 of them, but the other four were spared. In 2017, Allison published “Destined for War: Can America and China Escape Thucydides’s Trap?” At a time of deteriorating Sino-U.S. relations, Allison’s great work was highly sought after.
In 2019, I went to Harvard as a visiting scholar with two questions, one of which was to hear Allison’s explanation in person. Unexpectedly, Allison began his lecture by saying the book’s title was a publisher’s stunt to catch eyes. In fact, the focus of his own research was why those four pairs of countries managed to avoid war, and he concentrated on explaining what strategies China and the U.S. could each adopt to hopefully evade the Thucydides Trap.
However, even Allison was not certain that a U.S.-China war could be avoided. Chinese people of my generation heard about “war and revolution” every day in their youth, but by the time we graduated from university, it was all “peace and development.” Can we still say this is an era of peace and development? It’s hard to say. Looking around, wars are flaring up in many parts of the globe, and countries are resorting to war, even the threat of nuclear war, to resolve their problems. There is a new phrase in the 20th Party Congress report: “The world has once again reached a historical crossroads, and its future course will be decided by the choices of all peoples.” After all, in the global arena, it seems very difficult for the U.S., which has held the top position since 1890, to continue defending its title. China, the world’s largest power before 1940, fell behind in modern times but has been catching up rapidly since reform and opening-up. If measured by purchasing power parity, the IMF declared the new world champion as early as 2014. But let me say, unlike the Olympics, in the real world of political, economic, and military competition, a change in champion is accompanied by a change in rules and order. This is the reality of the global great upheaval.
In Oct. 2024, Renmin University invited John J. Mearsheimer to speak on U.S. foreign policy. Reading the reports afterward, Mearsheimer, as the proponent of “offensive realism” theory, bases his discussion of geopolitical conflicts on the premise that the international community is in a state of “anarchy,” with no supreme authority to arbitrate conflicts between states. The fundamental logic of world politics is “power is paramount, great powers are respected.” In this environment, great power competition is a natural consequence. From a power analysis standpoint, he believes the U.S. should not get bogged down in Europe and the Middle East but should reduce its global military presence and shift its focus to East Asia, because China’s rise is creating a regional hegemon that can challenge the U.S.
The new edition of Mearsheimer’s “The Tragedy of Great Power Politics” adds a tenth chapter (including a fascinating record of his debate with Yan Xuetong) that focuses on explaining the analysis and vision described above. His narrative and reasoning are blunt and clear. My reservation after reading it is that I feel his realism is not thorough enough, especially regarding the profound changes in America’s national condition from the postwar era to today, which lacks observation and reflection grounded in reality. Perhaps I’m being presumptuous, but if a generation of American elites were to see the “Rust Belt” in person more often and listen to the mournful songs of rural Americans, would they not find it easier to answer that America needs a much larger strategic retrenchment to truly achieve “America First”?
The problem is, even if the American political tide swings back toward isolationism, it will not be easy to implement. After enjoying sole global hegemony for so many years, under the sway of various inertias and vested interests, it is not possible to simply retrench on command. One year in Austin, visiting the Lyndon B. Johnson Presidential Library, I saw that the 36th U.S. president, who proposed the “Great Society” and pushed for the passage of the Civil Rights Act, was presented to the world as a tragic figure. The Vietnam War dragged on, and he was unable to extricate himself. His defense secretary kept reporting that if more troops were not sent, the Western dominoes would all fall, and Soviet influence would cover all of Southeast Asia. As a result, Lyndon Johnson decided time and again to increase troop levels, and by the end of his term in Jan. 1969, the number of American soldiers stationed in Vietnam reached a staggering 542,400! The Vietnam War was unprecedentedly brutal, and despite anti-war sentiment sweeping across America, it still dragged on for several more years until 1975, when the U.S. withdrew from the quagmire of Vietnam in total defeat.
Will Trump’s current wave of “America First” be more decisive? It’s hard to say. “America First” is not “America Only.” Beyond priority items, other matters are enough to keep him busy. The line between what is America’s business and what are world affairs inseparable from America cannot be drawn so clearly. Mearsheimer also advocates for the U.S. to reduce its global military presence, but he draws a line: America’s strategic retrenchment must not leave a vacuum for other “regional hegemons” to emerge and later prey on the U.S. Mearsheimer’s proposed role as an “offshore balancer” is likely not so easy to play. If influencing events from afar doesn’t work, will it be necessary to go “onshore”? From this perspective, the variables in the turning of the old world order and the formation of a new one will not be small.
The only fortunate thing is that, at this crossroads for humanity’s destiny, no matter which direction we take, we cannot do without engaging in economics. War preparedness and war not only cannot be separated from economic support but also provide new stimuli and opportunities for the economy that do not exist in peacetime. In the longer term, war and disaster can also drive shifts in economic centers of gravity and even generate new economic prosperity. At last year’s Caixin Singapore Forum, I spoke about how Quanzhou in Fujian, between the 10th and 14th centuries A.D., was transformed into a world-class maritime trade center by northern migrants fleeing south from the geopolitical conflicts between nomadic and agricultural peoples. A similar story is how the horrendous European world wars of the first half of the 20th century spurred the super-prosperity of the American economy. After 1945, in the midst of the U.S.-Soviet Cold War, the front-runners in the world economy were neither the U.S. nor the Soviet Union, but East Asia, including Japan and South Korea, the Four Asian Tigers, and the later rising Chinese mainland.
Will the great global upheaval put an end to such stories? I don’t think so. Fernand Braudel, a leader of the Annales School, once warned that the greater the era, the more we should pay attention to the changes ordinary people encounter in their daily lives and their behavioral responses. The outcome of an era is determined by the new opportunities discovered and seized by seemingly insignificant ordinary people.
This article is adapted from a speech by the author at the 2025 Caixin Summer Summit on June 13 in Hong Kong.
Zhou Qiren is a Chinese economist.
The views expressed in third-party articles are those of the authors and do not necessarily reflect the positions of Caixin.
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