A History of Global Capitalism by Sambit Bhattacharyya

Author:Sambit Bhattacharyya
Language: eng
Format: epub
ISBN: 9783030587369
Publisher: Springer International Publishing

8.11 US-China Rapprochement

The Sino-Soviet split and the border conflict of 1969 offered the United States a window of opportunity to mend its relationship with China. Following the humiliating defeat in Vietnam and the stalemate in Korea, the geopolitical strategists in America led by Henry Kissinger understood very well that America is far weaker than the combined political, economic, and military power of the Soviet Union and China especially on the Eurasian continent. Henry Kissinger, the principal architect of Richard Nixon administration’s China policy secretly flew to Beijing in 1971 where he held several meetings with the Chinese leadership. This was a precursor to Richard Nixon’s weeklong visit to China the following year. Nixon held several meetings with the Chinese leadership during his visit including meetings with Premier Zhou Enlai and Chairman Mao Zedong.

Prior to Richard Nixon’s visit, there were no diplomatic relations between the People’s Republic and the United States. During the Chinese civil war, the United States backed the nationalist and only recognised the Taiwanese administration as the legitimate government of China. However, the attitude changed following Richard Nixon’s visit in 1972. Full diplomatic relations were established in 1979 and in return, China agreed to a political settlement of the Taiwan question.

Warming of relations with China also had a positive effect on Soviet–American relationship. Fearing a hostile China allied with the United States in its backyard, the Soviet leadership under Leonid Brezhnev also pursued détente with Richard Nixon’s United States. This allowed the United States much need time to rebuild and regroup in this new Great Game following the debacle of Vietnam.

Richard Nixon inherited a weak American economy from Lyndon Johnson. The economy was plagued by high budget deficit, high unemployment, and high inflation. There were long-term structural challenges with the existing domestic production and investment-based model. It was yielding diminishing returns and low growth. Lack of pathbreaking innovations further intensified the diminishing returns challenge. After assuming office in 1969, Nixon followed conventional Republican macroeconomic policies of monetary and fiscal tightening to address long term structural challenges and control the budget deficit. It did not work as unemployment and inflation increased even further. In 1971, Nixon resorted to expansionary fiscal policy with the new Federal Reserve Chairman Arthur Burns simultaneously resorting to expansionary monetary policy. The economy grew and unemployment fell in the short term which helped Nixon win the 1972 election. However, in the long-term inflation plagued the economy and unemployment returned with the decline in investments and consumer spending. The 1973 oil price shock instituted by the Organisation of Arab Petroleum Producing Countries (a precursor to the modern Organisation of Petroleum Exporting Countries (OPEC)) against the supporters of Israel in the Yom Kippur War triggered another round of sharp economic contraction with high unemployment and high inflation. The American corporations suffered low profitability during this crisis and lobbied for structural solutions to the crisis.

The China opening offered an economic window of opportunity. With the death of Mao Zedong in 1974, the Chinese authorities were searching for an alternative model to stimulate the economy and improve living standards.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.