Dr. James H. Nolt was a Senior Fellow at the World Policy Institute for 23 years. He recently completed a book, International Political Economy: The Business of War and Peace, published by Routledge Press. His core research interest is the influence of business, especially finance, on international relations. He has also published a number of articles about the Chinese military and the East Asian military balance and is currently working on an article about the prospects of an economic crisis in China. Prof. Nolt recently lived in China for 7 years as founding campus dean of a joint venture college and later associate professor of management there. He has also taught at the New School University, graduate and undergraduate faculty, Seton Hall University, and Vanderbilt University. Prof. Nolt has a website with hundreds of his blogs, posts, and media interviews at www.polarizingpoliticaleconomy.com
Could you start by giving us a brief introduction of yourself and how you developed an interest in China?
I am an associate adjunct professor of international relations at New York University. I have also taught at the New School University, Seton Hall University, and Vanderbilt University, not to mention being the founding dean and an associate professor of management at the International College of Nanjing University of Posts and Telecommunications at Nanjing, China, a joint venture with New York Institute of Technology. I have a PhD in political science from the University of Chicago and an MA in Economics from UMass Amherst. I also worked as a software engineer in the medical industry for 6 years, rising to senior engineer. I often travel to China for lectures, consulting, and media appearances, though not since January 2020 with the start of COVID.
I first became interested in China during junior high school when I read Lao Zi on Taoism, Sun Zi on war, and Mao Zedong on guerrilla warfare. I first traveled to China in 1981 to teach English in a Chinese university, one of the first foreigners there after the Cultural Revolution. I have traveled there numerous times since, including living and working there for seven years.
You have worked and taught in China since the 1980s. Has your view of China changed as a result the changing power dynamics of the two nations? At present, the legacy of U.S.-China engagement is facing steep criticism from both the left and the right— do you think American leaders were wrong to sustain engagement policy with China over the past 40 years? What economic benefits has the U.S. derived from engagement with China? Do these benefits outweigh the drawbacks of engagement policy?
I have indeed witnessed the enormous transformation of Chinese society during the four decades since my first trip there. Beyond the enormous material development, my main impression is the fading of the enormous optimism and idealism I found there during my earliest trips.
Clearly, the engagement of the USA and its allies with China have been a major factor in its ability to transform from a relatively poor and isolated planned economy to the world’s greatest trading nation. Millions of Chinese have now studied and traveled abroad, a significant change. China’s emergence as an export powerhouse helped tame the inflationary tendencies otherwise building up in Western economies during the 1980s and subsequent debt bubble. This flood of inexpensive consumer goods, later supplemented by Chinese capital exports, enabled the West generally to experience the longest sustained debt expansion in world history. China’s successful economic reforms also contributed more to the demise of the Soviet Union than did Reagan’s renewed Cold War posturing. Despite the continued dominance of US firms in many spheres, including finance, media, culture, arms, and medical equipment and supplies, China’s reforms have done more to transform the world and shape the 21st century.
Assessing benefits and costs depends on your specific interests. I do not believe there is a universal measure of these things that applies to all or most people. Therefore, this is a long discussion. Certainly. China’s rise has been a major spur to globalization.
Your book, International Political Economy: The Business of War and Peace, covers a lot of important topics on political and economic development. Why do you think it is crucial to understand U.S.-China relations from a business perspective? You also discussed the term “corporatism” at the first chapter of your book, how to apply this term to U.S.-China relation?
Corporatism is my term for an alternative international relations theory, elements of which go back as far as the classical Greeks, critical of the dominant realist and liberal traditions. Both of these standard theories ignore how broad conflicting interests in society provide the basis for divergent foreign policies. Any foreign policy benefits some and harms others within any nation. A universally beneficial policy is a myth. That’s why I delve into the business foundations of international relations: to illustrate the rival societal interests, largely rooted in business, such as James Madison mentioned in his Federalist Papers essay number 10. The nature of capitalism polarizes business into rival nationalist-internationalist and bull-bear interest blocs. These often collaborate with like-minded interests abroad to achieve their goals at the expense of their domestic rivals, a factor literally inconceivable within the two mainstream IR theories.
In your writings and classes, you emphasize the importance of the private sector in the U.S.-China relations, including private businesses and people-to-people relationships. Why do you think these are important to understanding U.S.-China relations?
The private sector is the major element driving policy. Other interests may emerge episodically, but business interest is massive and continuous, especially between the USA and China, which have the world’s greatest commercial relationship. Many of the largest US companies gain much if not most of their profits from China business. Many commentators ignore the breath and power of the interests favoring good relations and exaggerate critical words or gestures of much less significance.
You believe China will confront an economic crisis soon. Why do you think so? Is the Evergrande scandal a warning sign of this inevitable crisis?
China is part of the world economy, which has been growing since the 1980s because of an unprecedented debt boom, the most sustained in world history. High private debt levels have consequences, especially extreme sensitivity to any fall in asset prices. This is a particular problem in China, where asset prices, most notably real estate, have risen to unsustainable heights. However, lowering those prices would panic and bankrupt numerous bullish investors who have borrowed funds to buy assets on the expectation that asset prices will continue to rise. Reversal of such expectations could cause a worldwide panic selling and the next major global slump. There were significant signs that a crisis was imminent at the time COVID hit. The pandemic ironically postponed the financing reckoning because it gave an urgent excuse to governments and central banks to begin a new and enormous round of debt expansion, postponing the crisis but assuring that it will be even larger when it finally hits.
What is your take on the current status of cross strait relations? How has China leveraged the economy over Taiwan? To what extent China is willing to use force if cross strait relations continue to worsen?
Most people answer this question by looking only at words and gestures, such as aircraft flights and ship sailings. Words and gestures are superficial. An attack on Taiwan would be counterproductive to reunification unless it were decisive, but it could not be decisive without the means for a massive D-Day-style amphibious invasion of Taiwan. China has not been expanding its military means sufficiently to attain such a capability. If it were to try to do so, Taiwan would have time to respond with countermeasures of its own. An arms race could result, but China’s ability to build up for a decisive victory, even if it did try, is not assured. Economic influence regarding Taiwan flows in both directions. Any broad use of force in East Asia would devastate the trade-dependent Chinese economy, as well as that of Taiwan. Thus, to borrow a term from nuclear war, an all-out armed conflict between China and Taiwan would portend “mutually assured destruction” of their economies. Thus deterrence continues to prevail.
U.S.-China relations rapidly deteriorated during the Trump administration. They have further deteriorated because of the pandemic and China’s growing aggressiveness on multiple fronts. Do you think tensions will persist? Could it lead to conflict? What do you think are the obstacles to improved relations?
Conflict and cooperation are both aspects of US-China relations, broadly speaking. That will always be the case. Armed conflict would be mutually destructive. so I expect it will continue to be avoided in favor of diplomatic management of conflict. President Biden represents business and societal interests with a strong stake in continued easing of US-China relations, so beyond the war of words, which always involves a large degree of postering for a domestic audience, relations have improved and will continue to improve from the low point under the last two years of the Trump Administration.