Interview: Michael Levin - The Next Great Clash

I very rarely find a book that I cannot keep down, specially when it comes to politics. The Next Great Clash: China and Russia vs. The United States by Michael Levin is a revelation. Not many analysts really do serious research before writing. Levin is different. He is a serious analyst who has had long stints in Soviet Union/Russia and China and he is currently Executive-in-Residence at the Thunderbird School of Global Management.

The introduction to the book starts in the most thoughtful manner. It is so gripping that you start believing in the power of book introductions once again - an art that had long vanished! He discusses his tough childhood and fight with disease as well as his struggle to learn about Russia and his success after some aimless times.

I love Levin's expression as it is profound, although it talks of some mundane things like global politics. Like he says:

"Reading is the collecting of intellectual income, writing is the spreading of it."

He uses a lot of research and the models of other researchers to test his conclusions that are based on his experience and knowledge.

Overall, a great book to read! Here is my interview with Michael Levin, the author.

1. You have talked of "One Radical Imbalance (American Debt) sustains another (Asian Surplus)". Just as the "rich" in the US are betting, foolishly, on a never ending stream of debt; aren't the Chinese, again foolishly, betting on unending stream of export wealth? And while talking of the aging US (and Western) population, we forget the same trend for China as well. So two questions:

(a) Is this a game of "who blinks first?" between the US and China and - in that sense - a repeat of the Star Wars tactic to destroy Soviet Union under its own weight?
(b) Is the Chinese "surplus" a notional surplus since it's invested in an instrument that it can best see ride down as the clash with the US increases?

LEVIN: Two things to keep in mind: if there is an economic break between the US and China, China has an ace in the hole: it can divert its attention to satisfying the demand of its domestic consumers as a replacement for export-led growth. The US seems to be at a disadvantage - it does not have an ace in the hole.

Second: You are right - both countries face demographic imbalances that will pose challenges in the future. It seems that America's advantage is its ability to absorb immigrants - recent protectionist sentiments aside. China also has some  advantages: its social structure dictates that children take care of parents; it is a private, family matter - so the state is not, thus far, burdened with pension plans.

Imagine the additional wealth that China will have at its disposal as it implements pension schemes.

2. For the clash to tangibly occur as a military confrontation, a complete decoupling between China and US economies needs to occur. What will be that mechanism? Is it possible for either to voluntarily decouple from each other?

If there is outright war, the decoupling will be a byproduct. The whole global economy will go haywire.

But China is developing asymmetric capabilities that exploit US weaknesses. If China is able to prevent the US from protecting Taiwan during a military confrontation - it has won.

By the way - I would like to emphasize: I hope I am all wrong about the next great clash. As you see though, the evidence is quite compelling.


3. Like you said very well, Europe learnt to use the "Human Rights Imperialism" with telling effect. It is very true that all the major powers use a Utopian ideal to create surrogates and followers. Again, as you have very rightly said - the US has considerably weakened two major alliances (UN and NATO) in recent years (probably the worst foreign affairs folly of the last 8 years despite Iraq). So, the US has lost that romantic "Moral Imperialistic Ideal" that inspired other people in its "mission". China, on the other hand, has embraced capitalism and has also weakened its position in its strongest "base" - the Communists and Marxists! Predictably, China has also lost its "Moral Imperialistic Ideal". How will these two powers gather vassals and followers?


Not really. The Chinese have demonstrated that they are successful communists - unlike their Soviet brethren. The Beijing consensus of economic development seems to have more adherents than the current Washington consensus. And the Chinese have very skillfully honed their image (although the recent disturbances in Tibet have upset China's "charm offensive") in the Muslim world, in Africa, and in Latin America.

4. India's "fascination" for the USSR and Russia is mainly because of a consistent and uninterrupted arms flow as opposed to wavering US positions. In the last one and a half decades, India has sent more professional immigrants to the US than all the other countries put together (every year, Indians get 40-50% of all H1B visas). That creates an intellectual ripple effect over two generations that moves out to influence minds as opposed to lobbyists. At the same time, with the highest percentage of younger population in the major economies, English education, and an education system that is privately owned so it can adjust to the demand rapidly, India is positioned to become the provider of world's management and executive talent over the next few years. How does that change the dynamics of the world's economies in the coming centuries? (PS: Rajat Gupta, the CEO of McKinsey, for example was instrumental in opening a world class business school in India - ISB - and also has expanded McKinsey's presence in India. Same goes for the PepsiCo CEO Indra Nooyi).

You know way more about India than I ever will.

5. Does India's business elite have a great deal of influence within the corridors of political power, or are they simply one more lobby to contend with? It seems that India's leaders rise through political parties/families - they do not come from business circles. Also, the Indian business community in Russia is highly organized and very wealthy. I would imagine that they are very involved with the Congress party, whereas Indian business elites in the U.S. might identify more with the BJP. What do you think?

Undoubtedly India has a great competitive advantage in its English-language capability - but the Chinese are very determined and hard-working. And they seem to be much better organized politically and so could easily launch a national English-language campaign (Incidentally, there is a fascinating article about this in the most recent New Yorker).

6. Despite its earlier start and higher percentage rise in GDP over last 3 decades, China has less than half the number of billionaires (official wealth counted) than India. Does that tell a tale? Is China's economy a government-sponsored musical chairs of using money where it sees the best returns and forcing its decisions into enterprise-led initiatives? With rising paper surpluses and a challenge from the US and a private-government combine of Indian economy* apart from a slowly awaking Japanese military power, does the Chinese economy appear to you as a "House of Cards"?

(PS: the Kazakhastan deal for oil was greatly influenced by the Lakshmi Mittal - who owns large steel plants in that country and has a JV with ONGC - in India's favor against the Chinese bids.)

China's economy does have many weak points - chief amongst them, its high percentage of non-performing bank loans (which you point out elsewhere). But China also has many strengths that are not captured by statistics and economic data - such as its ability to mobilize the population and a fervent belief that their time has come. The Chinese are also used to deprivation and sacrifice - something that most westerners are not familiar with.

Regarding the number of billionaires - some thoughts: Do these statistics take into account the number of overseas Chinese who are billionaires?

Also, in China, political connections are more important than wealth (although that may start to change). It would seem that the massive levels of corruption also distort the wealth statistics.

In a sense, all of the members of the central committee (approximately 300) are billionaires of power. And they are not wanting for material comforts.

7. In World War II, the US was an Aaly of Western Europe for the most part. It did not START any war until the end, which many believe it ended in an immoral way. Since then, there have been very few, if any, wars which the US has started and won. Does the US have the ability to attract allies that can forge its position? China has created its vassal states like Pakistan and North Korea to fight its wars that it does not want to fight itself. It has chosen to use the poverty of these vassal states while arming them and providing them with a sense of self-esteem in the absence of actual wealth (a policy very fruitfully used by the British with Indian kings during colonial rule) to create a vast strong set of "allies". How do these two strategies (or otherwise) of the US and China in the recent decades affect the future dynamics?

No one likes a bully - all the kids gang up on the bully as soon as he is down. George Bush/the US is perceived as the bully, and China is skillfully exploiting this, but recent events in Tibet are a great threat to China's strategy of seeking a more "multipolar" world.

8. Finally, a rather small detail: You said that you would sell expensive editions of the Koran in Russia - where your contacts were "refuseniks" (Jews refused immigration to Israel) to earn money. Why were these Jews buying the Koran, and not the Torah?

Please note: i did not sell the Korans - i gave them to the refuseniks, who in turn sold them on the black market to muslims. Access to the Torah was not a problem.