China's economic tools fill capitalism's void

The global embrace of lightly regulated capitalism over the last 40 years created a regulatory void the Chinese government has filled with an authoritarian form of economic coercion, I write in my new book “Beijing Rules.”

Why it matters: China's economic toolkit could help Beijing push the world toward an era of “embedded illiberalism” dominated by political loyalties enforced through market access and an international system severed from its democratic roots.

What's happening: The Chinese government rewards and punishes businesses and governments by allowing or prohibiting access to China’s huge markets, capital, and investments that companies and countries around the world increasingly see as vital to their prosperity.

• In this way, China is shaping global markets to incentivize adherence to its authoritarian geopolitical objectives.
• Beijing uses this leverage to stifle global dissent, shape the behavior of companies and governments, legitimize its political model as a superior alternative to liberal democracy, support its expanding military and defense objectives, weaken U.S. alliances, expand its surveillance state, and gain sway over international institutions.

Zoom out: Over the past four decades, democracy and the protection of fundamental human rights have become equated with the privatization of major industries and services, deregulation of business, and minimal government intervention in markets.

• The resulting system, along with a political culture that eschews government involvement in business decision making, has left the West with fewer tools to counterbalance the pressure the Chinese Communist Party places on foreign businesses.
• It’s an economic system that has granted vastly disproportionate power to the wealthy, whose interests often place little emphasis on protecting human rights.
• “Today, people often speak in the language of markets, not the language of politics or morality. We talk more about consumers or taxpayers than about citizens,” Ganesh Sitaraman, a legal scholar at Vanderbilt University and a longtime adviser to Senator Elizabeth Warren, observed in his 2019 book "The Great Democracy."

Money, like other forms of power, projects the values of those who have it. Similarly, a market economy, without a regulatory framework in place to guide it in one direction or another, projects the values of those who command its resources.

• Beijing’s economic statecraft thrives in this environment and has been crafted to take advantage of these conditions.
• China’s markets are the largest in the world, and Beijing has both weaponized access to those markets and successfully conveyed its rules to all who would profit from that access. China is simply playing by the rules established by neoliberalism.

Between the lines: There is now growing bipartisan agreement in the U.S. that the era of morality-free trade in the international sphere and blind veneration of corporate profits in the domestic sphere has created problems.

• Many progressives, such as Warren and Alexandria Ocasio-Cortez, consider those problems to include systemic inequality and environmental degradation.
• Some conservatives, such as Marco Rubio, have blamed the current U.S. model of market capitalism for the outsourcing of jobs abroad and the breakdown of modern family systems.

What to watch: The West's response to China’s authoritarian economic statecraft will shape global values and institutions for the rest of the 21st century.

• An effective response could be to build a “democratic economic statecraft” — using economic channels to defend liberal democratic values and systems, including human rights and political rights.
• Purely placing the blame on individual commercial actors for succumbing to the innovative economic statecraft of a trade superpower is largely ineffective. By engaging the Chinese market and toeing the Chinese Communist Party line, companies are simply playing by the rules that the United States has set for 40 years.
• Instead, policies that fundamentally change those rules and relink trade and human rights both at home and abroad could help to counter Beijing's illiberal coercion.

The bottom line: If Americans speak in the language of markets, to channel Sitaraman, then China hasn't just learned that language. It has learned to speak it louder than anyone else.