Destabilizing speculation

The dangers of decoupling by Daron Acemoglu


As Sino-US relations increasingly resemble the geopolitical dynamics of the original Cold War, the world is heading for a new charged equilibrium. While some in the West yearn for a new “Sputnik moment” to motivate investment and reform, they should be careful what they want.

BOSTON – The Chinese government’s crackdown on Alibaba last year, and ride-sharing company Didi this month, has sparked heated speculation about the future of that country’s tech industry. Some see recent Chinese regulatory interventions as part of a justifiable trend alongside increased scrutiny of big tech by US officials. Others see it as a game for controlling data that might otherwise be exploited by Western countries. And still others, more plausibly, see it as a wake-up call to remind big Chinese companies that the Chinese Communist Party is still in the driver’s seat.

But, more importantly, the Chinese government’s actions are part of a larger effort to decouple China from the United States – a development that could have serious global implications. Despite the continued deterioration of Sino-US economic and strategic relations, few believed that the rivalry would turn into a Cold War-style geopolitical confrontation. For a while, the United States was too dependent on China, and the two economies were too closely linked. Now we are perhaps headed for a fundamentally different balance.

Three interrelated dynamics defined the Cold War. The first, and perhaps the most important, was ideological rivalry. The West led by the United States and the Soviet Union had different visions of how the world should be organized, and each tried to propagate their vision, sometimes by nefarious means. There was also a military dimension, illustrated most clearly by a nuclear arms race. And both blocs were eager to take the lead in scientific, technological and economic progress, as they recognized that this was essential to prevail ideologically and militarily.

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