Stephen Cohen and Bradford DeLong (2010), The End of Influence, New York: Basic Books.
tl;dr: The widespread fears of U.S. dependency on China, fueled by late announcements that “they now have the money”, seem less justified than most observers think. At the same time, I argue that neither the so-called United States nor so-called China (not to speak of smaller economic entities) are the sovereign states they used to be: rather, they themselves are dependent variables in an economic flow which precedes the countries it is seemingly originating from.
On September 6, 2012, the New York Times Online published an article containing an interview with New York-based real estate broker Nikki Field on her four trips a year to mainland China, designed, as the paper puts it, “to more aggressively seek out Chinese buyers on their own turf.” (Barrionuevo 2012: par. 6) Indicating a turning tide in economic relations between American and Chinese businesses and their cultures, Field said: “’We as Americans always expected anyone to adapt to our business style, and they did […] That is no longer true with the Chinese. There are too many of them, they have too much power. We truly must adapt to their style of business in order to do deals.” (ibid.: par. 9).
At the same time, President Obama, in his acceptance speech, warned Democrats and Americans in general to maintain investments in education, to be able to “compete with the scientists and engineers coming out of China.” (Obama 2012: p. 2, par. 3) Republican nominee Mitt Romney, too, warned Americans, asking, in his acceptance speech: “Does the America we want borrow a trillion dollars from China? No.” (Romney 2012: par. 111)
Certainly, the issue these speeches and comments raise does not just apply to the relations between China and the United States, but it seems to me – and Stephen Cohan and Bradford DeLong agree several times in their The End of Influence – that these relations are, in many respects, the most significant example of a recent development in economic power and wealth that seems to benefit China at the expense of the United States. It will be remembered that the Economist, more or less prominently in several of its back issues in 2011 and 2012, warned that China would own the United States, should U.S. borrowing and Chinese lending continue at the pace currently observed. Furthermore, to give an international perspective, European politics are vexed by the same fear of China as a new powerful economic and political actor – a fear that was amply demonstrated when China, in October 2011, announced its plans to purchase a significant minority of shares in the Greek central port of Pireaus.
What is on the rise in trans-pacific relations, however, does not seem to be just China, as a political entity to be feared or an economic battlefield to be conquered. Nor is it China as a cultural phenomenon, which necessitates, as real estate broker Nikki Field said in the abovementioned New York Times Online article, “an at times exasperating journey to understand China,” (Barrionuevo 2012: par. 7), and which seems to fuel deep-seated fears of a Chinese century in Euro-American voters.
What is emerging, rather, is a closely intertwined system of exchange: a constant flow of goods from China to the United States and finance capital from the United States to China, mediated and upheld by “the U.S. financial system, which decides who gets to borrow and on what terms” (109). This emerging system is so closely intertwined, Cohen and DeLong maintain, that China and the United States have to maintain their uneasy relationship at almost any cost (5). The debt-driven relationship of the United States to China, then, is seen by most commentators, Cohen and DeLong among them, as “a financial balance of terror” (25), in which both sides depend on each other. In this balance, the United States would rely on China to force down both its wages (27) and its currency value relative to the US-Dollar (95), to continue raising the standard of living of the American population (24). China, on the other hand, would rely on the United States population to keep living beyond their means (107) by amassing debt obligations (91), thus fueling China’s growth (146).
The flipside of both also seems to be self-evident: on the one hand, all investments in imports from Chinese production are absent in American production (146), and what is more, American innovation hubs will also move, Cohen and DeLong caution, to countries which, instead of acting as “importer of last resort” (77), practice state-led development instead. Once more, China is the main example for this strategy, as its value-added, to an increasing degree, no longer relies on the exploitation of its workers (a claim that I find somewhat dubious) (96), but on technological innovation (97), which, the authors argue, can and will be shifted away from “the heartland of innovation” (126).
On the other hand, the Chinese model of growth not only relies on the stability of the US-Dollar and the United States’ general ability to maintain the global economic system’s stability (13), but also on the Chinese government’s ability to maintain its growth without risking a workers’ revolt against the conditions under which this growth is achieved and maintained. 
This type of explanation certainly has its merits. It especially allows to emphasize that China is not the threat to the United States (or Europe) that it is perceived as in the newspaper articles and sources mentioned in the beginning of this paper, but rather, that the interdependence between the two countries (and, by extension, between both countries and the rest of the world) makes it necessary for them to cooperate, at least to some extent (25). It also, contrary to the specters both President Obama and Governor Romney raise, shows that the United States is not “simply becoming dependent – but it is no longer independent, either” (27), and that therefore some overtly extreme fears of a Chinese ‘takeover’ are almost certainly unjustified.
It seems to me, however, that the question: to just what is the United States not “dependent, but not independent, either”?, is not sufficiently answered by Cohen and DeLong, who, ultimately, focus on two distinct entities (‘the United States’, ‘China’), and treat their interdependence as a third, mediating, but ultimately secondary entity. What they do not see, in my opinion, is that the relation between the two countries is the primary entity: that the point of view from which the analysis is given must be changed, and that both the Chinese and the United States’ economy must be seen as effects of the flow that is seemingly taking place between them, but that really constitutes them.
The decisive element to consider here is that the role of the “U.S. financial system” (109), interpreted by Cohen an DeLong as a purely mediating force, is in fact a creating force: it is the flow of American debt to China which, in a very material sense, creates Chinese export goods to the United States. The United States financial sector, having become “a dominant force, perhaps the dominant force” (110) of the American economy, fulfills its role by lending money to American consumers to buy goods produced in China – but they can do so only because, as the authors maintain, there had been a flow of Chinese money, buying U.S. government obligations (22), such that the U.S. government could fund tax cuts and de facto high-risk mortgage subsidies (e.g., through financial deregulation) (148). American consumption and Chinese production exist simply because money is available: money flows, here, beget material goods. Neither supply nor demand exists without them.
The converse relationship is organized around the primacy of economic flows to stable country-based economies as well. Thus, Chinese ‘consumption’ of U.S. debt obligations can only be possible because the United States’ currency is stable and its credit rating maintained (hence the world-wide insecurity when a fringe fraction of the United States Congress led the way to what is now known as the ‘debt-ceiling crisis’ in 2011). This, however, relies simply on the need for the U.S. government to sell further amounts of its debt obligations, since, as Cohen and DeLong argue throughout the book, its abiltiy to repay them is literally non-existent. Finally, the condition of possibility for maintaining this operation is simply the Chinese need to have the U.S. government de facto subsidize U.S. citizens’ consumption – so Chinese goods can be sold, and the cycle can begin anew. It is thus not even money which begets material goods here, but, even further, the reproduction of a cycle of mutual deferral of a breakdown, which begets an exchange of a ‘production’ of U.S. government debt obligations for a Chinese ‘production’ of U.S. Dollars, which ‘produces’ U.S. consumption, which – in the final instance – produces Chinese material goods. Neither the so-called United States nor so-called China are independent variables in this game.
Whether the abovementioned American financial industry (which, as Roubini and Mihm had convincingly shown, is certainly not an American financial industry, but rather a global one) is an independent actor in this game seems to be highly questionable as well. Certainly, on the one hand, their mediating activity is indispensable for both American consumption and Chinese production, as well as Chinese ‘consumption’ of U.S. debt and American ‘production’ of money. On the other hand, however, and by the same token, their operations also, and to a more considerable degree than in the case of states, depends on the continuation of the abovementioned cycle – on top of which a large part of the impressive edifice that broke down in the 2007-2009 crisis was erected (113).
What, then, have so-called China and the so-called United States become, when they are no longer independent variables, i.e., sovereign states, entities which, due to their sovereignty, are outside of (financial) markets, free to interfere or to refrain from interfering as they wish?
A tentative answer would be: they, too, have become actors in this very financial market of which they no longer set the rules. Sovereign Wealth Funds, these seemingly state-run entities interfering in the affairs of other states – thus enhancing the fears mentioned at the beginning of this paper (96 sq.) – are, it seems to me, the new form state activity has taken in a time in which, at least at this scale of global economic relations, armed rivalry has given way to shaky non-violent rivalry. If, however, the goal of an SWF is to create consumption in the countries in which it invests – or, at least, in the one country that has consume all that the other countries in the world produce – then they, too, are subject to the necessity of maintaining cycles of borrowing, lending, consuming and producing. Ultimately, SWFs, and the countries that run/guide/steer them, are thus subject to maintaining a global economy based on their ability to keep flowing: neither the states from which they originate, nor the companies they are invested in, and neither the goods they help produce, nor the consumers who they give the money to buy the goods matter – only the overarching goal of all so-called financial actors: that the financial flows keep moving all over the world.
Countries and people, companies and goods are, as it were, a by-product of this.
 This part of China’s successful growth policies is absent both in Cohen and DeLong’s praises of Chinese skycraper culture (62) and their narrative of Chinese economic growth in general (96 sq.), but is amply evidenced in other sources (see, for example, Harvey 2005: 127, 148).
Cohen and DeLong, page numbers in brackets.
Barrionuevo, Alexei (2012): Big Deal. Why Brokers Study Chinese. New York Times Online, September 6, 2012. Available online (retrieved September 8, 2012).
Harvey, David (2005): A Brief History of Neoliberalism. New York: Oxford University Press.
Obama, Barack (2012): President Obama’s Full Remarks From the Democratic National Convention. New York Times Online, September 7, 2012. Available online (retrieved September 8, 2012)
Romney, Mitt (2012): Transcript: Mitt Romney’s Acceptance Speech. NPR, August 30, 2012. Available online (retrieved September 8, 2012)