Worried about North Korea? You should be thankful for it, if HSBC economist Stephen King is to be believed. North Korea may pose a nuclear threat to the rest of the world, but it is the only thing keeping China and the US from war; without it we would see a resurgence of that well fought battle – capitalism versus communism.
Speaking at a panel discussion for financial services hosted by law firm Dentons this month, King enthused that real macro-economic threat to the functionality of the West was not nuclear war – rather the inevitable ascendancy of China and the East.
“In 1989, the year the Berlin Wall fell, the West began to feel triumphant. Francis Fukuyama wrote in his essay The End of History that year how Western liberal democracy had emerged as the successful economic model – the West had won,” noted King.
“But that has not panned out. The Cold War did not mark the end of communism – China has been more successful in the last 20 years. An authoritarian regime has triumphed.”
Even before the global financial crisis a decade ago, King asserts that there was a growing gap between what developed economies were achieving and what the politicians in power were aiming for.
“Globalisation has helped narrow the gap between developed and emerging nations. But income inequality in the West has risen,” continued King.
“The US has become a tale of the have nots and have yachts. The UK has regional dispersion. The eurozone sees the inequality between nations – Italy versus Germany. In 1999, Italians lived on 90% of German income, now is it 73%. The political narrative blames this on others – it says the problems of A, B and C are the fault of D and E. They are playing the blame game and were we used to build bonds we are now all going our own way; Brexit and Trump prove this.”
But by becoming protectionist the West is creating a void King says – one which China will happily inhabit; the superpower of the future.
“The US is making its reach across the world smaller, walking away from the Trans-Pacific Partnership creates a vacuum. China is building an alliance to rival the ones the West had in the second half of the 20th century. The Shanghai Cooperation Organisation, the Asian Infrastructure Investment Bank… these are a competing version of globalisation,” he says.
Why This Could Mean War
King argues that wherever there is an emergence of a new power, the stalling power – the incumbent – has to make room, and this often leads to conflict. He points to examples in 1914 between Russia and Germany versus the British Empire.
“Should we be worried?” King asks. “Yes. China’s growth has been extraordinary and ever if it has a setback, the potential is huge. The US has stalled, its productivity is slipping. When you get changes in global economic power, the lead to seismic shifts. China is increasing its sphere of influence. I would be happier if North Korea did not have nuclear, bit it is a buffer state.”
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