In their new article “Bejing’s Bismarckian Ghosts: How Great Powers Compete Economically”, published in the The Washington Quarterly, Princeton professors Markus Brunnermeier and Harold James, and coauthor Rush Doshi, offer the 19th-Century geopolitical and economic rivalry of Great Britain and Germany as a "useful guide for policymakers seeking to understand the dynamics of the emerging Sino-American competition." The authors argue that in both rivalries, the countries involved have used the tools of standard-setting, technology theft, financial power, infrastructure investment, and tariffs in order to gain economic power over each other. Tariffs, however, are the bluntest and least effective of all the available tools.
Both rivalries share common features. The established powers, Britain and the United States, are liberal, free-market economies, while the challenging countries are autocratic, state-protected economies. The differences between the two systems lead the established powers to claim that their rivals are “cheating” by not participating in the competitive free-market economy. Likewise, the rising powers feel unsatisfied and threatened.
The authors conclude that America should take China's challenge to its own technological prowess seriously by engaging in multilateral trade deals like the Trans-Pacific Partnership, which allow the United States to set technological and infrastructure standards. Similarly, the United States should more intently police technology theft and invest in research and higher education to maintain technological supremacy. In regards to wielding financial power in a great power rivalry, the authors note that America must be careful to not impose too many sanctions and tariffs on China, thus hurting its allies in the process, like Great Britain did with France in 1932. By illuminating the failure of British tariffs to stop Germany's economic rise, Brunnermeier, Doshi, and James contend that a better approach is for the United States to work with allies to craft a sound and coordinated economic policy response to address China's rise.
Markus K. Brunnermeier is the Edwards S. Sanford Professor at Princeton University. He is a faculty member of the Department of Economics and director of Princeton's Bendheim Center for Finance.
Rush Doshi is a Brookings-Yale postdoctoral fellow in Foreign Policy at the Brookings Institution.
Harold James, Claude and Lore Kelly Professor in European Studies, is Professor of History and International Affairs and the Director of the Program in Contemporary European Politics and Society at Princeton University.