Source: Capital News of Beijing Daily    Published: 2023-09-12

As the 15th summit of BRICS leaders concluded in Johannesburg, South Africa, the topic of "de-dollarization" has become a hot subject of discussion.

During his visit to China in April of this year, Brazilian President Luiz Inácio Lula da Silva attended the inauguration ceremony of the President of the New Development Bank of BRICS.

At that time, he said, "Every night I ask myself why all countries have to base their trade on the dollar. Why can't we do trade based on our own currencies?"

This skepticism was brought to South Africa and discussed among the BRICS leaders, making the expansion of currency settlements in local currencies one of the topics of this BRICS summit.

If the U.S. dollar no longer holds its dominant position in the international monetary system, what would the new international monetary system look like? What role does the "Belt and Road Initiative" play in it? US officials continuously criticize China's Belt and Road Initiative and advocate for "de-risking," revealing what strategic dilemma on the part of the US? Have China and the US already entered a "new Cold War"?

Capital News, in collaboration with RDCY, has launched the "Global Governance Forum" section. Radhika Desai, a professor of political science at the University of Manitoba in Canada, shared her views with us on topics such as "de-dollarization," the impact of the Belt and Road Initiative, and China-US relations.

THE DE-DOLLARIZATION

Capital News: The United States' greatest power comes from having the world's leading reserve currency, which gives the US enormous buying power because it gives it the ability to print the world's money and have it widely accepted abroad and to control who gets it. But we can see that US assets, including US treasuries, are becoming less attractive. In your opinion, what aspects of crisis is the current US dollar system facing today? And what drives de-dollarization?

Radhika Desai: On the whole, what we have in discussions of the dollar system are two opposed shools. One  set of discourses and scholarly literature continually assumes that the dollar system is completely natural, that it can go on forever. There's basically an entire academic industry telling the whole world that the dollar system is fantastic. In contrast, my own work has actually looked underneath these discourses and discovered a very different reality.

Second school consists of the  literature that looks at de-dollarization. It points  to this or that difficulty that the dollar has. In particular, it is pointing to the rise of alternatives, for example, swap agreements between central banks, agreements between countries to trade in one and others currencies, the rise of new institutions, the rise of a new sources of finance, particularly from China, of which course the Belt and Road Initiative is such an important part.

So these two sets of literature stand apart. Unfortunately, the first is completely wrong, while the second is right but it is not complete. To fully comprehend the contemporary interest in de-dollarization, it is necessary to consider two aspects:

Firstly, the emergence of alternative arrangements. Secondly, the longstanding internal contradictions within the dollar system.

In your question, you asked about a couple of different things. First, you said that the United States dollar has been the world's currency for a very long time, etc. But the fact of the matter is that the United States has never served as of the world currency in a stable fashion. This is the key. Once we understand this key fact, it begins to unlock why de-dollarization is happening. This process is driven, on one hand, by the emergence of alternatives and, on the other hand, by the inherent contradictions within the dollar system.

You also highlighted another point: the idea, often echoed in literature, that the United States enjoys the "exorbitant privilege" of borrowing in its currency and of unrestricted money printing. And these days we even have modern monetary theory that has come along and said either that any country can print as much money as it likes, or they say at least the United States can do so. But in reality, this has never been true. This is evidenced by the weakening and softening of the treasury market. It is a really good example. Another really interesting example of how this ‘exhorbitant privilege’ does not really exist. President Biden came to power riding on a wave of enormous hope that he was going to engage in a lot of spending in order to fix the U.S. economy,  fix the health system, everything. But in reality, his spending programs have been quite modest. And even with that modest spending program, he has had to raise taxes. Now, if the United States could borrow with impunity, why would he raise taxes? He certainly did not want to.

And then another point I will make is that recently the United States had the cliffhanger moment when it looked as though the Republicans were not going to agree to lift the debt ceiling. But in the end, they did lift the debt ceiling and everybody thought that a major crisis was averted. But actually, what people don't realize is that now the United States is going to borrow even more money, almost $1 trillion more, before the year’s end. And this is going to create new burdens on the already overloaded treasury market. Remember the first many months of the year, the government was not issuing any new debt because the debt ceiling had not been raised and even then the treasury market was weak. Now it's going to issue even more that.

So what's the treasury market going to do now？To truly grasp the developments within the dollar system, an understanding of its internal contradictions is paramount. I would say that these contradictions begin from the misconception, prevalent in literature on U.S. dollar hegemony, that it is entirely natural for the currency of the most influential or powerful nation to serve as the world's currency. In reality, history contradicts this notion. Dating back to the early 20th century, U.S. ruling elites have aspired to establish the dollar as the world's primary currency. They envisage a role akin to the pound sterling's during the 19th and early 20th centuries. However, the circumstances that facilitated sterling's global role were exceptional, rooted in Britain's extensive empire and the surpluses derived from its non-settler colonies.

This distinction between settler colonies like Canada and New Zealand and non-settler colonies like Africa and British India is crucial. The non-settler colonies were essentially paying in this period for the industrialization of the settler  colony. This is the way sterling worked. The famous ‘capital exports’ through which Britain supplied the world with liquidity were possible only thank to the surpluses extracted from the non-settler colonies which were exported primarily to the settler colonies and to Europe.

The U.S., lacking colonies from which to extract surpluses, could only issue dollars and provide global liquidity by running deficits. Yet, these deficits have always been a problem. Belgian economist Robert Triffin highlighted this predicament in the late 1950s: while deficits provide global liquidity, they simultaneously undermine the dollar's attractiveness, applying downward pressure. This was the famous ‘Triffin Dilemma’ So, this situation already forced the U.S.  essentially to pay out gold instead of dollars. Eventually by 1971, once the gold was exhausted, it had to break the link between the dollar and gold.

My work, notably my book "Geopolitical Economy," underscores that post-1971, in order to overcome the Triffin Dilemma in which the fact that the United States is spending more abroad than it is earning lowers the value of the dollar, what they have done is they have essentially expanded dollar-denominated financial activity in order to overcome the dilemma. Because although for trade and productive and investment reasons, people may not want the dollar, they may still want the dollar for speculative reasons and predatory reasons.

This big financial casino that the United States has opened and operated since the 1970s has required the United States to constantly expand dollar-denominated financial activity, which is extremely volatile. It has been bad for the U.S. Economy. It has made the U.S. economy productively weaker and it has been a disaster for the rest of the world because it leads to regular financial crisis. The East Asian financial crisis and the 2008 financial crisis stand as examples of these repercussions ingrained in the dollar's operation.

Ultimately, the current unraveling of the dollar system can be traced to the U.S.'s diminishing capacity to sustain this financial casino. As this casino begins to falter, the demise of the dollar system looms on the horizon.

Capital News: You just said about the internal contradiction from a history perspective, which reminds me of the trust problem. The world has been happy to use the US dollar as the global reserve currency because they trusted the US government to make the right decisions on the US dollar that would take into consideration the economic interests not only of American people but also of the remaining 7 billion people outside America who also rely on the US dollar to fund their international transactions. This trust is a key pillar of the resilience of the US dollar as a global reserve currency. But in recent decades, this trust has begun to erode because America has occasionally used the privilege of having the global reserve currency as a weapon against other countries. Examples include Russia, and Afghanistan, whose reserves had been sequestered essentially been stolen. How does this affect the credibility of the US dollar?

Radhika Desai: What's you talking about is what's recently come to be known as the weaponization of the dollar system. Again, I think it's important to underline that the dollar system has always run for the benefit of the United States. And the idea that somehow the world was happy to use the dollar has always been an idea again pedaled by the academics, scholars who are constantly talking about how the dollar system is completely natural and good and how the United States is providing a public service to the rest of the world.

However, as I have outlined, the dollar has never maintained a stable role as the world's primary currency. The only reason the world was using the dollar was because they had no alternative. The United States essentially rejected Keynes’s  proposals for a multilaterally organized currency back in 1944 at Bretton Woods. Since then, it has always worked to try to ensure that any alternative that emerges is destroyed or not accepted or that it doesn't work. Today, however, U.S.'s ability to do that has decreased. That's why alternatives are emerging already.

Now, coming back to the weaponization of the dollar system. You're absolutely right. The dollar system has been recognized in recent years as a part of a larger strategy of the U.S. administration to counter or compensate for the decline of the U.S. and the decline of its economy. This decline has ramifications for the U.S.'s capacity to exert influence on global affairs, reflecting a decline in U.S. power and imperialism.

In response, the U.S. has employed various means at its disposal to mitigate these effects and to penalize nations that challenge its dominance. As you mentioned, recent instances involve the seizure of reserves from Russia, Afghanistan, Venezuela, Iran, and other nations that have historically faced unfavorable treatment from the United States.

Significantly, this behavior has prompted heightened awareness in the world as a whole about these US practices, particularly regarding Russia's experience. Russia's status as a permanent member of the Security Council and a major global power underscores the gravity of these actions. This realization is compounded by the emergence of alternatives, largely facilitated by China's prominent role and the availability of financial resources. Consequently, the dollar system is undergoing transformation.

Another crucial aspect to consider is the pivotal role played by countries that maintain an open capital account, enabling wealthy individuals within those countries to funnel their resources into the dollar-based system.

Conversely, China's management of its capital account has shown that maintaining control over capital flows can lead to wealth accumulation and national power without relying on the U.S.-centered financial arena.

This growing realization aligns with the perspective that effective capital account management is essential for development and for retaining domestic wealth within the country and investing it there. Should more nations adopt this approach, the foundations of the dollar system would be further eroded. Meanwhile, alternative systems, exemplified by China and its BRICS counterparts, emphasize production and trade rather than speculative finance, offering a distinct model for payments and financial interactions.

In conclusion, the emergence of a new system, with a focus on stability and production, represents a positive development. The historical issues faced by developing nations under the dollar system, such as financial crises, currency devaluation, and capital flight, could be mitigated in this evolving landscape.

Capital News: What you just said about the third world countries reminded me of the “debt trap” accusation. U.S. Treasury Secretary Janet Yellen said that the U.S. is working hard to counter China's influence in international institutions and in leading to developing countries, and that by lending to developing countries, China leaves them trapped in debt. However, according to World Bank statistics, multilateral financial institutions and commercial creditors account for more than 80 percent of the sovereign debt of developing countries. Since last year, the US has launched unprecedented massive interest rate hikes, making the debt problems of certain countries even worse. How do you view the issue of debt in developing countries? Who is the main culprit behind the exacerbation of this problem?

Radhika Desai: Certainly, the financial relationship between Western countries and third world nations has been fraught with complexities.

On one hand, Western nations exhibit a desire to lend to third world countries, primarily motivated by the opportunity to levy high interest rates. Moreover, this desire to lend is also prompted by the substantial cash reserves their financial institutions have. When financial institutions hold significant cash reserves, they must seek avenues to earn interest on these reserves. So, they must loan this money  out. They say come on and  borrow money from us. The dominant narrative is one of first world doing third world countries a favour and making capital available to them when, in reality, first world financial institutions are desperate to lend.  Inevitbaly, this need to lend  has resulted in lending volumes far surpassing sustainable repayment capacities of the borrower countries. This discrepancy is further compounded by the fact that the loans are often extended for non-productive purposes or under terms that do not facilitate effective repayment. Unlike loans directed towards productive ventures that generate revenue, Western loans frequently lack such foresight, culminating in an inability to repay the debt. This phenomenon has recurrently engendered debt crises, attributable to the Western financial framework's disregard for the viability of repayment and ultimately for long-term productive investment.

This disregard has become particularly problematic since the 1982 third world debt crisis. Since then, the U.S. and its allied countries have largely ignored the fundamental principle that both debtor and creditor are jointly responsible when debt repayment issues arise. Resolution necessitates shared efforts to alleviate the situation, share the pain and formulate a feasible repayment strategy. However, this mutual responsibility has been eclipsed by the Western approach. Anyway, this is the problematic nature of the western financial system.

China has emerged as a prominent player in the global financial landscape over the past decade and a half. This emergence has positioned China as a substantial lender, eliciting reactions from Western nations that seek to attribute the debt-related predicaments that they have  orchestrated to China. This is the crux of the matter. Western powers claim that China engages in a practice known as "debt trap diplomacy." In truth, the nations that have historically woven a debt trap are, indeed, the Western ones. Even in the 1970s, there was a book titled "The Debt Trap" underscoring this pattern. Western nations have habitually enticed poor countries into debt traps.

As you rightly point out, if one scrutinizes both the quantity and the quality of Chinese lending, it remains a relatively minor fraction of the overall debt burden carried by third world nations in terms of sheer quantity.

Qualitatively, moreover, China’s credit is much better.  China's lending practices are generally oriented towards productive and infrastructure-centric endeavors. Furthermore, China demonstrates a willingness to engage in debt renegotiations in the face of repayment difficulties. This contrasts starkly with Western practices, where harsh structural adjustment programs have been imposed on countries undergoing debt crises, particularly from the 1980s onward. The effect is to make these countries work harder and become poorer at the same time, compounding the repayment difficulties while making cheap goods from these countries available for the West. The austerity measures imposed during the third world debt crisis subjected many nations to severe consequences, effectively leading to lost two decades of development during the 1980s, even extending into the 1990s.

The outcome of these programs was economic contraction in numerous countries, resulting in negative growth rates year after year. These imposed terms and conditions epitomize the true concept of a "debt trap." The notion of a so called “Chinese-led debt trap” lacks substantial evidence, as far as my understanding goes.

Capital News: We can observe that as the internal contradictions are mounting within the dollar system. Outside there are a series of alternatives and possibilities that are emerging. Countries being hurt by U.S. sanctions are developing ways to get around them or undermine the U.S.’s power to impose them. China’s central bank has created a digital currency, which will make China less exposed to U.S. sanctions. Countries like Saudi Arabia and Brazil have indicated their willingness to promote trade settlement with China using the China’s RMB instead of dollars. What do you think about the benefits of the internationalization of the RMB? How do you view the progress and achievements of the internationalization of the RMB in recent years?

Radhika Desai: Let me answer this question by giving a bit of background. There are many misunderstandings to clear up.

First of all, many proponents of the durability of the dollar system often argue that there is no clear successor currency in sight. The Renminbi is not, they say,  a potential successor,  because China lacks the capacity or willingness to internationalize the Renminbi fully.

It is important to understand exactly what is wrong with this perspective. To respond to this by saying that the Renminbe can and should be internatioalised would be to misunderstand the issue.

If  we take into account the historical imbalances that resulted when the currency of one country tried to be the currency of the world. We know the imbalances and shortcomings of the dollar system. And even the sterling system had huge problems even though the vast British empire underpinned it. . If we consider these limitations of national currencies posing as world currencies,  we come to realize that de-dollarization doesn't mean the emergence of a direct successor, another national currency posing as the world’s currency. If the limitations of the past are to be overcome, de-dollarization must  unfold in a way as to create  a transformed international monetary framework altogether.

I just want to put that out because that forms the larger context in which I want to discuss Renminbi internationalization. So having said this, I'm not saying that the Renminbi is not being internationalized or will not be internationalized or that the internationalization of the Renminbi will not proceed further. I think all these things are true and they will happen and they are happening. So that's good.

However, the pattern of internationalization of the Renminbi will be, must be, completely different from the way in which the dollar system has been internationalized. The dollar's internationalization has involved expanding a speculative and predatory financial system in ways that have not just impoverished the rest of the world but also deindustrialized the US economy itself. Such internationalization would run  counter to the sustainable and broad-based development objectives of China and other nations.

China's leadership is acutely aware of the imperative for development. So, in that sense, I think the internationalization of the Renminbi is expected to align with development goals, both for China itself and for countries involved in cooperative developmental initiatives like the Belt and Road Initiative and the Asian Infrastructure Investment Bank, etc. This already means that its internationalization will take a very different form.

For trade purposes, China will certainly promote the international use of the Renminbi to facilitate trade transactions with its partners. But China is also doing other things, for example, accepting other countries’ currencies and so on. This will foster a markedly different international financial system, distinct from the dollar-centric model.

And I would say that if the Chinese government were to pursue a type of internationalization of the Renminbi which mimics that of the dollar, China's development will rapidly deteriorate. It will rapidly go into reverse. Because China has and needs to maintain a financial system which is very different from the U.S. financial system. That is the backbone of its spectacular development so far. China's system emphasizes productive investment rather than speculative lending, ensuring that finance remains closely tied to production. To maintain this structure and the symbiotic relationship between banks and industries, China must pursue a unique path of Renminbi internationalization.

In any case, China does not want internationalization of the sorr the dollar has pursued. It is a form of dominance. China has always said that we are not looking for hegemony, we want to have a multipolar world, we want to have a world in which there is a lot of development.

China will undoubtedly do what it can to facilitate this, but it cannot so it on its own. Other countries in the world also have to cultivate the sort of leadership that drives development within their borders, they too need to take responsibility for their own development, much as China has taken responsibility for its own development.

In conclusion, the internationalization of the Renminbi will take a form that represents a departure from the trajectory of currency internationalization that sterling and the dollar have pursued so far. As long as China remains the most important country for a very long time, the Renminbi will be a very important currency. Perhaps the most important but not the only one. The Renminbi will play significant roles without seeking exclusive dominance.

Capital News: If the U.S. dollar is no longer the world’s NO.1 currency, what would be the NO.1 global currency?

Radhika Desai: That's exactly what I'm trying to say: there will not be a single reserve currency in the world. The Renminbi may be, likely will be, the most important of them, but countries will keep a portfolio of reserve currencies depending on their trading, investment and financial needs.

THE BELT AND ROAD INITIATIVE

Capital News: What’s your impression of the Belt and Road Initiative(BRI)? What impact has the Belt and Road Initiative had on the global economy, geopolitics, and international cooperation?

Radhika Desai: I think that the Belt and Road Initiative is massive. With theSilk RoadEconomic Belt and the21st Century Maritime Silk Road, China can reach out to the entire world. Through that, it is engaging the rest of the world on terms that are both quantitative and qualitatively superior to what the west has to offer.

First of all, let me say that China's Belt and Road Initiative is an excellent way for China, on the one hand, to support its own development, but also to create the sort of development world-wide within which China as a very leading economy can continue to thrive.

Secondly, on the global economy, it has certainly aided in expanding the global economy, producing higher and better growth, etc.

Thirdly, it is the cutting edge of the change in geopolitics. I mean this in the sense that if you think about what defines the geopolitical economy of the world, on one hand, there is a relative decline of the West—not absolutely, of course, but in relative terms. The weight of Western economies, particularly the U.S. economy, in the global economy is diminishing while that of the  BRICS is rising.  But both China’s economic performance and China's initiatives like the BRI are vastly superior to that of the other BRICS country. The decline of the West and the ascent of China and other emerging powers reshape the geopolitical landscape, positioning China at the forefront of this change.

And then, finally, you were talking about international governance. I would say that the BRI is laying the foundation for the qualitatively new institutions of international governance we need. If you think about it, people often regard the Bretton Woods system as a great one, but they tend to overlook the fact that U.S. intervention in the design ensured that it essentially became a set of international governance arrangements weighted in favor of the United States and imperial countries in general.

So, what we are witnessing now is the world approaching the cusp of a new type of international governance system. This system will mark a shift towards a post-imperial international governance framework, with foundations built on principles like mutual cooperation for mutual benefit, rather than relying on imperial power and subordination, as has been the case with institutions such as the World Bank, the IMF, and the WTO, particularly. The United Nations stands apart in this context, and I believe it plays a role in these changes to international economic governance.

I'm not surprised at all by the insistence of countries like China and many others on revisiting the original goals of the UN charter. The UN charter is based on all excellent principles. However, these principles have suffered erosion over time. So, these countries are saying we should restore the original UN charter and go back to those principles. This effort can only yield positive outcomes and will be significant in the context of post-imperial international governance structures.

And I also feel that another crucial aspect to consider is that, over the course of the past several decades, the US and Western countries have forefront in aligning UN institutions with corporate funding, especially from Western corporations. Unfortunately, this trend has had a tendency to weaken the foundations of the United Nations' institutions. In my opinion, a shift should occur, moving towards funding the UN system by its member countries, as originally intended. This approach would ensure that the purposes and projects of the United Nations remain aligned with their original intent. In that sense, I anticipate that China will assume a leading role in establishing a post-imperial system of global governance.

Capital News: In your opinion, what challenges does the BRI face internationally? What are the roots of these challenges?

Radhika Desai: This is also a very important question because the key source of instability in the world order today is not the emergence of China or other countries. Rather, it stems from the West's determined efforts to resist this emergence. Unfortunately, while China and the rest of the world, are diligently striving to empower others to take on better roles and encouraging positive behavior change, they shouldn't depend on the West changing its stance any time soon. I anticipate that the West will probably evolve due to a combination of factors, including external pressure from China's growing role and the world's increasing preference for China over the United States. These pressures will mount over time. As this transformation unfolds, people within these countries will likely recognize the inherent flaws in their domestic governance and in their global interactions. Both aspects will require comprehensive reform.

For instance, consider the current U.S. scenario where Professor Cornel West is running for the presidency, potentially as a Green Party candidate. While Professor West may not have high chances of winning, his candidacy and the issues he's addressing—such as the domestic U.S. economy, U.S. global relations, and ending the wars that the United States keeps engaging in—are crucial.

The United States is undoubtedly grappling with deep-seated challenges. The upcoming election offers a valuable opportunity to reshape the discourse within the U.S., and Professor West could play a significant role in effecting this change. Such efforts could potentially diminish the obstacles impeding the emergence of a post-imperial international governance system. However, only time will tell if these expectations materialize."

Capital News: We have noticed that the United States has implemented a series of anti-China policies in recent years, aiming to provoke a “new Cold War” against China. Under this mindset of Cold War and Zero-sum game, the United States views the Belt and Road Initiative as China’s ideological expansion and geopolitical competition, using economic interests as bait. How do you view this “new Cold War” policy? What impact does it have on the global political and economic landscape?

Radhika Desai: First of all, let's address the 'new Cold War,' which can be roughly dated back to the Trump presidency. Although changes were underway before that, like Obama's 'Pivot to Asia' and other factors, the 'new Cold War' against China is best understood as follows:

In the 80s and 90s, particularly in the 90s, the United States imagined  that by fostering friendlier relations with China, it could maintain China's role as a subordinate producer of inexpensive goods, driven by low-cost labor. This was the vision of the West. However, as the mid-2000s arrived and especially after the 2008 financial crisis, it became evident that China was not going to give up its commitment to socialism, its commitment to developing its own economy, its commitment to technologically upgrading its productive economy and so on. Realizing this, Western nations progressively adopted more adversarial behaviors, giving rise to the 'new Cold War' against China.

It's worth noting that the proxy war against Russia is an integral part of the broader strategy to isolate and weaken China. The proxy war and the 'new Cold War' serve a common purpose.

The problem for the United States and its allies is that this is not succeeding. Even at the outset of the 'new Cold War,' many countries, including Europe and Japan, expressed discontent with U.S. sanctions and their extraterritorial impact, hindering European trade with China.

So, people were discontented with various aspects of the ongoing conflicts, including the proxy war involving Russia and the imposition of sanctions on Russia. The extraterritorial nature of these sanctions has only intensified the existing conflicts.

What is becoming very clear as is that this “new Cold War”, which is largely at the moment, as far as China is concerned, confined to sanctions, is that it is boomeranging. It is not achieving its intended goals. Instead, it's making the situation more difficult for the United States itself and particularly for its allies.

Indeed, many people are saying that considering the impact of this situation on Europe's economy and the way it is being adversely affected, one could even argue that more than just a proxy war against Russia, the current conflict over Ukraine is, in fact, a United States war against Europe, aimed at destroying Europe's productive economy.

In this context, at the moment, it looks as the European leaders that are in office at the moment are going along with it. However, to be candid, considering the economic toll Europe is enduring – which impacts both European capitalists and ordinary citizens – I am uncertain whether this situation can be sustained for an extended period. Despite all the discourse about Western unity and the like, I anticipate significant destabilizing developments within this supposed unity of the Western bloc.

In summary, the "new Cold War" against China is destined to fall short of its goals. While it will indeed pose challenges for China, they will be manageable ones. China will confront these challenges and remain resilient. The approach might lead China to adopt a more amicable stance. If the United States were not pursuing this course, it might choose a more accommodating approach. The actions of the United States and Western nations suggest that their declarations are not entirely genuine. They frequently express their commitment to global development, yet as soon as one part of the world begins developing like China, they react with hysteria. It shows you that their professed commitment to development is nothing but hypocrisy.

We might hope for a more constructive approach from the Western world. Even if such an approach is not forthcoming, it's important to recognize that China is well-equipped to handle any challenges. In my assessment, the only scenarios capable of significantly disrupting this course are those involving nuclear conflict or similar extreme circumstances – although such scenarios are far from being part of the agenda, and it's our hope that they remain so.

Capital News: We see that Biden pledged that the U.S. Does not seek a new Cold War, but he has never stopped playing the game of group politics and touting the false narrative of “democracy versus autocracy”. What do you think of the inconsistency between U.S. words and actions?

Radhika Desai: This is a really interesting question and one must recognize the extent to which the United States has experienced decline. The increasing inequality within the United States has given rise to profound social and political divisions in the U.S. These divisions have given rise to a new politics that are  increasingly focused on these internal issues in order to secure electoral victories, but not in order to actually resolve them. Politicians, both Trump and Biden and their like, exploit these issues to get elected, but they resolve nothing.

You will remember that around the time when there was G7 meeting in Japan, President Biden had to go home early because he had to manage the debt ceiling crisis. The acrimony between Democrats and Republicans, as well as the deep-seated divisions within the United States, stem from the nation's declining status and the escalating inequalities brought about by financialization and related factors.

The reason I bring this up is that everybody hoped when President Biden was elected that he would herald a reversal of the policies introduced during the Trump era. But instead of these policies, in fact, he has taken an even more anti-China stance and he has even initiated a new conflict with Russia, something that even Trump refrained from doing. The reason is very simple: If President Biden does not cater to the same factors that led to Trump's policies, he stands little chance of getting re-elected. And we already know that, in order to get elected, President Biden significantly outspent Trump. And in the coming elections, he's going to have to do that again and do it in the outspent Trump even more, if he contends with a candidate similar to Trump.

In conclusion, I would say that the reason why we are seeing this continuation of new cold war and similar policies, is because within the U.S context, you have to realize that a lot of people are grappling with hardship. And what Trump has done is he has started a way of dealing with it not by dealing with the root causes of the suffering, which is the United States’ productive decline. A good leadership of the U.S. could say that what the U.S needs to do is to focus on reviving its productive economy, withdraw from involvement in foreign conflicts, and fostering greater equality within the country, etc. Actual sources of these issues need to be addressed, but instead US politicians are saying to people who are suffering that the real cause of your problem is China and we are going to attack China.

Hence, the foundation of the anti-China policy appears rooted in U.S. domestic politics. From my perspective, it seems unlikely to change in the near future.

Capital News: Recently, U.S. government frequently embraces “de-risking” to get Europe on board with measures to deny key technology to China. What do you think of the term “de-risking” and is this term a reflection of the U.S. new Cold War policy?

Radhika Desai: It is definitely a reflection of the new cold war, highlighting the problematic nature of conducting this Cold War for the United States in general, and for the Western countries, particularly the United States and the broader Western nations.

So, what do I mean by that? First and foremost, the conduct of this new cold war poses several challenges for the United States for several reasons.

Firstly, the U.S. economy, over the last couple of decades, two or three decades, has become very reliant on the Chinese economy. U.S. corporations have become significantly dependent on China's economic ties. As a consequence, segments within the U.S. ruling and capitalist classes that feel threatened by China's technological progress, particularly those in Silicon Valley. Some advocate for engaging in a new form of global competition centered around China, while others were saying, no, why are we doing this? We cannot afford to do this due to the potential risks and costs involved. This creates substantial ambiguity within the U.S. elites regarding their stance on a new Cold War involving China.

It's crucial to remember that this deep ambiguity also extends to the Western alliance. The Europeans and the Japanese want to continue to be able to trade and do business with China. They don't want a new cold war, etc.

Clearly what some people were once talking about which is “decoupling” from China. Decoupling from China will be a disaster for the United States. Even though US-China economic relationships have been loosening up a little bit, a complete decoupling would have severe negative repercussions for the United States.

In response, instead of decoupling, they are now using the term “de-risking” as an alternative approach. So that how will they somehow manage on the one hand to wager new cold war and on the other hand to deal with the inevitable economic dislocations that it will bring in its strain. So, the word de-risking is being used in this context.

But, quite frankly, it's unclear whether European leaders, like the one using this term, or President Biden truly understand the full implications of 'de-risking.' They appear to be groping in the dark, as they find themselves caught between the need for China's economic contributions and the concerns posed by it.

Capital News: How do you think China and the US should avoid a new Cold War?

Radhika Desai: China is doing everything in its power to avoid the new cold war. The Chinese leadership can and should continue doing what it's doing. I think they seem to be handling the situation skillfully. It's important to demonstrate to the world that the China is bending over backwards to repair this relationship as indeed they are. There is no reason why should not the U.S. and China benefit from a mutually beneficial relationship.

The problem lies in the fact that the United States seems uninterested in such a relationship. Rather, the United States wants a relationship in which it extracts one-sided benefits, which is no longer a viable option.

And since that is not available to it, the United States finds itself in a dilemma where it can't decide whether to continue to relate to China and be as close economically to China as it has been. Remember back in the 2000s people even was talking about “Chimerica”. That is how deeply integrated the U.S. became dependent on China, not so vice versa China was never as dependent on the U.S.

Anyway, U.S. seems to want to have its cake and eat it too, but of course it cannot.  It's like the child who wants to eat and sleep at the same time. It can't do that. And so it's going to cry. That's what we are seeing. The United States is reacting with frustration – throwing tantrum after tantrum.