Human civilization stands at a crossroads. Urgent global challenges need to be confronted, including destruction of the natural environment; climate change; inequality of income, wealth and life chances; industrial concentration; regulation of the financial system and the threats from pandemics. Looming above all of these is the possibility of a ‘Clash of Civilizations’ and a New Peloponnesian War. Only by looking deep into the past can one understand the direction that the long-term evolution of world civilization might take. The relationship between China and the West will play a central role in the path that humanity follows in the decades and centuries ahead. Understanding the long-run civilizational development of China and the West is essential to deeper mutual understanding, which is necessary to overcome the current crisis in the relationship. If this dangerous era is to avoid disastrous conflict, knowing oneself is as important as knowing one’s counterpart.
Over the long-run of history China and the West passed through two phases of convergence and two phases of divergence. These have left a deep imprint upon the respective civilisations and shape the way in which they interact today at the Crossroads of Civilisation.
The first convergence. From the earliest times up until the Fall of the Roman Empire the two regions followed parallel paths. The philosophical investigations of Confucius (551-479 BC) and Mencius (372-289 BC) in the East and those of Plato (428-348 BC) and Aristotle (384-322 BC) in the West, occurred under similar conditions at roughly the same time. In the first millennium BC in northern China and the eastern Mediterranean political turbulence was accompanied by dynamic market development. In both regions this setting stimulated profound investigations about political systems and the ethical foundations of the good society. In both cases, under the Roman Empire and Han Dynasty (206 BC-220 AD) respectively, the era of disunity and conflict was followed by several hundred years of unity, which facilitated economic and civilizational progress. In both cases, the unified territory developed a common written language. Despite some important differences, the similarity in historical trajectory in the East and the West in the Ancient World is striking. In the eighteenth century, Montesqieu posed his famous question: why did China remain united and peaceful for most of its history while Europe was mostly divided and at war.
The first divergence. This long era of extended from the Fall of the Roman Empire up until the late eighteenth century. Throughout this period China continued along the path that had been set under the Han Dynasty. The meritocratic bureaucratic system was refined and evolved, but the fundamental features remained intact. The Chinese bureaucracy was one of the enduring achievements of human civilization. It ruled in a pragmatic, non-ideological fashion. The Confucian concept of ‘benevolence’ constituted the system’s ethical foundation. The essence of the system of governance was finding a ‘Middle Way’ that sought balance between different interests (yin and yang) in order to achieve a ‘positive sum’ outcome. The bureaucracy’s guiding ethical principle was contained in the famous words attributed to Confucius: ‘all under heaven for the common good’. The ideal bureaucrat was ‘first to endure pain and last to enjoy pleasure’.
The bureaucracy nurtured entrepreneurship and market competition, but undertook crucially important functions necessary for markets to prosper and serve the interests of the mass of the population: maintaining peace across the vast unified territory, which allowed the economy to benefit from specialization and exchange; constructing and maintaining both locally and nationally a vast infrastructure of water control; famine relief; compiling encyclopaedias and textbooks; administering a legal system that protected property rights for producers and traders; and ensuring commodity price stability, especially the price of grain. Finance and commerce flourished, but government was firmly in the hands of the scholar-officials.
Under this system China achieved tremendous technological progress. By the early European Middle Ages there was a wide technological and civilizational gulf separating Europe and China. Many Chinese innovations, which included not only paper, the compass, watertight ship compartments, silk, porcelain, canal lock-gates, and the blast furnace, but also the key elements of the steam engine, made their way to Europe from China along the inter-continental trade routes and made a crucial contribution to Europe’s technical progress after the Renaissance. By the early eighteenth century, on the eve of the British Industrial Revolution, China and Europe stood at a similar technological level. In the West, after the great unity of the Roman Empire was shattered, Europe divided into separate states, languages and cultures. Zero-sum conflict penetrated deep into the European psyche. The advent of gunpowder and tubular weapons, both of which originated in China, revolutionized warfare within the West, profoundly reinforcing the intensity of international conflict within Europe. It also provided the means for the West to begin its violent conquest of the non-European world, including North America.
The second divergence. The start of this era can be dated almost exactly at the year 1800, when the patent on Bolton and Watt’s advanced steam engine expired and the steam engine became the core of the British Industrial Revolution. Within half a century the world was turned upside down. By the late nineteenth century Europe and its North American offshoot had established comprehensive global economic, technological, political and military dominance. It permitted the great age of Western colonial conquest, with Britain at the forefront. The West’s dominant position in global political economy continued through into the post-colonial age. Right up until the twenty-first century, the West dominated the global business and financial system, global innovation and the institutions of global governance. After more than 2,000 years of comprehensive civilizational leadership, China’s political economy disintegrated under the combined impact of internal and external pressures. China was reduced to a ‘Land of Famine’, underdevelopment and political chaos. Its economy shrunk to a small fraction of total world output. The revolution led by the Communist Party of China (CPC) provided new hope for the Chinese people. However, in the face of fierce international hostility, China withdrew from engagement with the world economy and attempted to establish a utopian, non-market economy. This structure crushed the dynamic force of competition. By the time Mao Zedong died in 1976, China was still a backward economy, isolated from the world with widespread poverty. There was a yawning technological gap with the West and China’s GDP was a small fraction of the world total.
The second convergence. This era began as soon as Mao Zedong died in 1976, but was formalized in 1978 with the decision of the CPC leadership to launch the ‘reform and opening up’. China’s rural reforms (1979-83) laid the foundations of the pragmatic and experimental approach to system reform. They were followed by further experimental reforms in every sector of the economy, continually adjusting the balance between state and market in a search for the most suitable relationship between the ‘invisible hand’ of market competition and the ‘visible hand’ of ethically-guided state regulation of the market. The state continued to perform key functions that the market could not provide, including industrial policy to support catch-up by indigenous firms; orchestrating infrastructure construction in order to provide housing, transport, telecommunications, electricity, water, and sewage facilities; as well as provision of key services such as education and health. Financial firms are regulated closely by the bureaucracy and the financial sector plays a central role in ‘serving the real economy’.
Throughout the period of Reform and Opening-up, a large body of Western opinion hoped and believed that the CPC would collapse. Instead, under the leadership of the CPC this era has witnessed China’s remarkable rejuvenation. Despite many problems, including the environment, inequality, innovation challenges, an ageing population, and corruption, the economy continued to grow strongly, making a major contribution to growth of the global economy. Alongside increasing GDP per person the focus of national policy has turned towards building ‘common prosperity’, with the goal of providing equal opportunities for self-fulfilment for every segment of society. It became increasing clear that China’s governance system under the CPC was built upon deep roots in Chinese civilisation, with the injunction to ‘serve the people’ at its core. The ancient philosophical roots of the CPC were fundamentally different from the shallow historical foundations of the CPSU.
The collapse of the Soviet Union seemed to represent the victory of the West’s free market capitalism and parliamentary democracy. However, the West’s dominance of the era of the global business revolution masked profound underlying contradictions. The West’s democratic system only came into being in the late nineteenth century. It was ‘fit for purpose’ for the era of Western global dominance, but it is questionable whether it is ‘fit for purpose’ to meet the global challenges of the twenty-first century. The success of giant Western firms in building global business systems has weakened their relationship with their home economies. Inequality of income and wealth has widened, alongside stagnation of real incomes. The revolution in information technology combined with the integration of over four billion workers in developing countries into the global labour market, has undermined labour’s bargaining power and greatly increased worker insecurity. The population is ageing. The influence of the financial sector has grown relentlessly, revealed in a shocking fashion by the global financial crisis. ‘Regulatory capture’ of government policy by global financial firms facilitated the forty-year asset price bull market, with the willing complicity of voters. The profound effects of the crisis were alleviated through measures designed to ‘support capital markets’ in a systemic exercise in moral hazard. The response to covid followed the same pattern, resulting in an astounding boom in asset prices with huge gains in wealth for the small fraction of the population. By 2021 the ratio of GDP to debt in the ‘mature economies’ reached 1:4.2, compared with 1:1.1 in 1980. The West’s financial system stands on the edge of an abyss.
There is widespread fear that an ‘Eclipse of the West’ is occurring. The share of global GDP (at PPP prices) produced by the developed countries plummeted from 64 per cent in 1980 to 43 per cent in 2020. ‘China’s Rise’ occupies the forefront of these fears. China’s share of global GDP (at PPP prices) today exceeds that of either the USA or the EU. There is a wide anxiety that China will replace the West as the dominant force in global economics, business, innovation, global governance and military affairs. During the Vietnam War Senator Fulbright warned against the ‘tendency of antagonists to dehumanize each other’: ‘Man’s capacity for decent behaviour seems to vary directly with his perception of others as individual humans with human motives and feelings, whereas his capacity for barbarous behaviour seems to increase with his perception of an adversary in abstract terms’. The concept of the Yellow Peril has re-surfaced in Western discourse on China. The possibility of a new Peloponnesian War between China and the West has become a topic for open discussion. Thucydides observed: ‘What made war inevitable was the growth of Athenian power and the fear which this caused in Sparta’. Sthenelaidas urged the Spartans to declare war on Athens: ‘Do not allow the Athenians to grow still stronger’.
There is an urgent need at the Crossroads in Civilization for China and the West to achieve mutual understanding. On the one hand, the West needs to understand the profound influence of China’s history upon its domestic governance and approach to international relations. It is impossible for the West to engage successfully with China unless it appreciates China’s long-term civilizational achievement for 2,000 years prior to the British Industrial Revolution. Although China was the most important part of the global political economy throughout this era, it did not seek to dominate the world outside China. Innovations that took place in China made a vital contribution to Western civilisation. On the other hand, China needs to understand the deep psycho-social crisis within the West as its short 200-year era of comprehensive global dominance draws to a close. It is likely that in 25-50 years’ time, let alone 100 years or more, the West’s role in global governance will be greatly reduced compared to the past 200 years. This is hard for the West to accept.
The civilizational differences between China and the West have the potential to result in zero-sum conflict, producing global instability and violence, but they also have the potential to combine in a positive-sum fashion that helps to construct a sustainable and peaceful global future for the whole of humanity. China’s long tradition of governing the market in the common interest has the potential to make a vital contribution to the technologies, culture and governance of the human species in the decades and centuries ahead. China’s long political tradition of seeking for the ‘Middle Way’ lends itself naturally to the search for balance and ‘win-win’, positive-sum solutions. The West’s short-lived democratic tradition in domestic affairs has been consistent with zero-sum aggression internationally. If the West is unwilling to cooperate with China to face the common challenges to humanity and wishes instead to pursue confrontation, it should consider carefully its own capability compared with that of China to withstand a period of prolonged struggle.
Peter Nolan CBE is the emeritus Chong Hua Professor in Chinese Development and Founding Director of the Centre of Development Studies at the University of Cambridge.