As with people, countries’ behaviour tends to be shaped by their roles and responsibilities.
An example of that is the US itself. Economist Anne Krueger has documented how the US enthusiasm for free trade has changed as its relative power has declined.
At the end of World War II, the US was the dominant world economy, and the only country with the financial strength to lead the reconstruction.
The benefits of free global trade and economic integration were obvious to America’s politicians. The consequence of the new global order established under the auspices of the US was the most prosperous quarter of a century in history.
However, as Europe and Japan were rebuilt, and America’s relative economic importance declined, so did its enthusiasm for free trade.
Since the 1970s, Krueger says, US policy has become increasingly ambivalent and contradictory. While it has continued to support multilateral trade liberalisation, at the same time it increased its use of restrictive trade measures.
“In rhetoric, much of the discussion has used catch-words such as ‘free trade but fair trade’ to imply that intervention is warranted if other countries are ‘unfair’ traders,” Krueger says.
In the 1980s US official policy shifted to a “two-track” approach in which America’s support for multilateral trade reform was coupled with so-called free trade agreements with particular countries.
This relationship between behaviour and responsibility can work in both directions. It would be surprising if China’s attitudes towards the rest of the world did not change as its middle class grew.
Assertive middle class
President Xi may have raised his domestic popularity by increasing China’s military strength and foreign-policy assertiveness. But military parades and aggressive foreign policies are not middle-class enthusiasms.
In the West, the middle-class is more concerned with the economic success of the foreign countries on which their prosperity depends.
The middle class may not assert itself in China in quite the same way it has in Western democracies but it will assert itself. If history is a guide, the Communist Party will be increasingly middle class because high levels of education are needed to run a high-income economy.
Former senior US State Department officials Kurt Campbell and Jake Sutherland put it this way: China faces the “ultimate reality”, which is that it is very hard to have a highly dynamic, market-based economy with a middle class – while having a Leninist, centrally-run political system.
In the meantime, if the geopolitical analyst, Fareed Zakaria, is right, the US will face its own ultimate reality.
As Zakaria explained in his 2020 Lowy lecture, Washington will confront “a new kind of bipolarity in which you trade with China, you try to oppose it on human rights issues, you separate from it on certain technological issues, and join with it on others.”
“There will be hedging, deterrence, containment, co-operation, trade and partnerships all happening at the same time.”
That is likely to require a more nuanced approach to US-Chinese relations than the one Yellen sketched out at her confirmation hearing.
Alan Mitchell is a bluenotes columnist and former economics editor at the AFR