Almost a month after the debacle at the United Nations climate conference in Copenhagen (Conference of Parties or COP 15), the question of who scuttled the talks elicits fury and derision.

By many accounts, President Barack Obama comes across either as a figure who valiantly tries to rescue a doomed conference, or as a well-meaning head of state whose hands are unfortunately tied by the realities of U.S. politics.

As the villain of the continuing climate drama, Washington has been replaced in much of the media by Beijing. China did make mistakes in Copenhagen, but the media portrayal of it as the spoiler of the climate change negotiations is neither accurate nor fair. Like Hamlet, Shakespeare's conflicted Prince of Denmark, China was caught in multiple crosscurrents in Copenhagen. Its failure to manage these led to one of its biggest diplomatic setbacks in years.

The British Accusation

In the immediate aftermath of the talks, Ed Miliband, Britain's secretary of energy and climate change, charged that China vetoed an agreement on a 50 percent global reduction in greenhouse gas emissions by 2050, or on 80 percent reductions by developed countries "despite the support of a coalition of developed and the vast majority of developing countries."

Many climate activists would probably have taken Miliband's statement as simply part of the blame game after the controversial ending of a critical conference, had it not been seconded — and in detail — by Mark Lynas of the Guardian, a British newspaper that's usually critical of the policies of Washington, London, and other northern governments. Lynas described the scene at a key Friday night meeting of selected countries as the clock raced to the conclusion of the conference:

What I saw was profoundly shocking. The Chinese premier, Wen Jinbao, did not deign to attend the meetings personally, instead sending a second-tier official in the country's foreign ministry to sit opposite Obama himself. To those who would blame Obama and rich countries in general, know this: It was China's representative who insisted that industrialized country targets, previously agreed as an 80 percent cut by 2050, be taken out of the deal. "Why can't we even mention our own targets?" demanded a furious Angela Merkel. Australia's prime minister, Kevin Rudd, was annoyed enough to bang his microphone. Brazil's representative too pointed out the illogicality of China's position. Why should rich countries not announce even this unilateral cut? The Chinese delegate said no, and I watched, aghast, as Merkel threw up her hands in despair and conceded the point. Now we know why – because China bet, correctly, that Obama would get the blame for the Copenhagen accord's lack of ambition.

This account of a relatively low-ranking Chinese official vetoing the naming of unilateral cuts offered by heads of northern countries is indeed shocking. But there's something the Guardian piece neglects to mention: The meeting was one of several unofficial meetings with a small number of countries that Obama had called, apparently with the support of host Denmark, in order to impose a deal on the climate conference, and the drafting of the declaration was, in fact, a violation of an agreed-on conference process.

Where China Went Wrong

Where China went wrong was not so much in opposing the listing of the emission numbers, but in agreeing to attend these covert caucuses where Obama and a small group of other heads of state sought to unilaterally draft a declaration. China undoubtedly knew that these meetings, which included leaders of selected northern countries as well as those of Brazil, South Africa, and India, undermined the UN process. In the days leading up to Copenhagen, China had heard its allies in the developing world expose and denounce a covert effort by Denmark to convoke a parallel conference of over 20 countries to push through an unauthorized "Danish text" that advanced a climate agenda favored by the developed countries.

It's perhaps not coincidental that most of the countries invited by Denmark were participants in the "Major Economies Forum on Energy and Climate" first called by President George W. Bush, and re-launched before the Copenhagen meeting by Obama, allegedly to "facilitate a candid dialogue among major developed and developing economies." The real aim of both the Major Economies Forum and the Danish parallel conference was, in the opinion of some Southern observers, to drive a wedge between more advanced developing countries and the poorer, least developed, and most vulnerable countries.

Second Thoughts?

Having joined the covert Obama caucuses, China probably realized that it couldn't lend too much legitimacy to a declaration that issued from them, since this would anger the majority of developing countries excluded from the meetings, which resembled the notorious "Green Room" get-togethers of heavy hitters in international trade during the ministerial conferences of the World Trade Organization. This backtracking probably explains Prime Minister Wen Jiao Bao's absence from the final caucus to finalize the declaration and his replacement by a relatively low-ranking official. This was the meeting witnessed by Mark Lynas. China blocked the declaration of voluntary emissions reduction figures — designed to give the big climate polluters the veneer of global responsibility without any significant obligations — because it did not likely want to give too much prominence to a document drafted at the margins of the conference.

By attending the caucuses and participating in the drafting of the unauthorized declaration, China laid itself open to a diplomatic fiasco. Eager to escape the blame for the collapse of what had been billed as the most important conference of our lifetime, the North could sanctimoniously point to China's blocking the numbers to "prove" that it was the conference spoiler, which is precisely what Britain's Miliband did. At the same time, many developing country negotiators and observers were confirmed in their suspicions that China has a self-serving agenda inconsistent with that of the global South. After all, China joined the Obama caucuses and participated in the drafting of an unauthorized political declaration that the prominent Indian intellectual Praful Bidwai described as a "dirty collusive deal" between the U.S.-led North and the China-led heavy polluters of the South. Despite Beijing's point-by-point responses to such accusations, the general perception took hold that it was to blame for the failed talks.

The Chinese leadership must find this billing as the villain of Copenhagen very frustrating. After all, right before Copenhagen, Beijing promised that it would reduce carbon dioxide emissions per unit of gross domestic product in 2020 by 40-45 percent compared to 2005 levels. Its automobile fuel-efficiency standards are now stricter than those of the United States. It's a global leader in wind and solar energy development. Even Thomas Friedman, no China lover, talked about China's "Green Leap Forward" and how the government is determined to meet the energy challenge "with cleaner, homegrown sources so that its future economy will be less vulnerable to supply shocks and so it doesn't pollute itself to death."

The Real Villain

If there were a government that sabotaged the meeting, it was the United States. U.S. negotiators made clear to the world, even before Copenhagen, that Washington wasn't yet ready for binding commitments after evading the emissions cuts required by the Kyoto Protocol for over a decade. Using U.S. Senate opposition as an excuse, Obama's negotiators systematically dampened any hopes for the binding accord that the global public had expected Copenhagen would produce. After being shamed by the pledges of other countries, Washington ultimately committed to a 17 percent voluntary cut of greenhouse gas emissions from 2005 levels. But other countries viewed Washington's offer, which translated into an insignificant 4 percent reduction from 1990 levels, as a joke.

Whether Obama and his negotiators were right in fearing a backlash from the right wing if they made the United States appear too ambitious is a matter of debate. Nevertheless, Washington's diplomacy ensured that Copenhagen would be dead on arrival. It's easy to imagine Beijing's resentment at Obama's push to engineer a PR triumph via a declaration with high-sounding rhetoric, laced with meaningless voluntary commitments and backed up by so little actual commitment.

China's Growth Problem

Although China was not the villain of Copenhagen, it did play the role of accomplice. It participated in Obama's unofficial caucuses of the rich and the powerful, even as it sought to lead the "G77 and China" grouping in the formal UN process. The conflicting demands of these two roles underline China's contradictory status in the world: It is simultaneously an economic superpower with a massive carbon footprint and a developing country. Its economic and ecological impact on the world is now greater than most developed countries, but its leadership and people continue to see themselves as belonging to the developing world.

In 2009, China displaced the United States as the world's biggest automobile market and Germany as the world's top exporter. Many economists expect that China will surpass Japan this year as the second leading economy, on its way to becoming the largest economy sometime after 2030.

So fast has China's growth been in the last two decades that, as analyst Zachary Karabell notes, "as many as 300 million people are middle class or upper middle class by any definition, and that number is equivalent to the population of the United States and of the European Union." Yet hundreds of millions of rural Chinese are mired in poverty, earning an average of $285 a year. Moving up from poverty and hunger is their common aspiration, and Beijing fears that there will be hell to pay if this is thwarted.

Making more and more of its population middle class in order to stave off political unrest is thus the Chinese leadership's overriding goal. It can only accomplish this goal, in its view, by continuing on a high-growth path that is dependent, at least in the short term, on coal. China is now the world's number-one consumer of coal and its use now earns it the dubious honor of being the world's number one emitter of greenhouse gases. As Richard Heinberg has noted, "while China is quickly becoming the world leader in renewable energy technologies, it has no realistic prospect of phasing out coal without giving up its high GDP growth rates."

China's formal position, leading up to Copenhagen, was that the meeting should come up with a legally binding agreement committing the United States and other industrialized countries to deep cuts in their greenhouse gas emissions while limiting action demanded from developing countries like itself to voluntary targets. Yet so destabilizing is China's coal-dependent high-growth strategy that even if COP 15 had produced an agreement specifying mandatory cuts from the developed countries, the pressure on Beijing to agree to similar obligatory cuts would grow as it overtook Japan as the world's second-largest economy and closed in on the United States. And the pressure would come not just from the North but the South as well.

Thus the single-minded dedication to high-speed growth, which is the axis around which both its domestic and foreign policies spin, has motivated China to put off as long as possible the day when it will have to agree to mandatory limits on its greenhouse gas emissions. As such, the weak, Obama-brokered accord that came out of Copenhagen and was mainly meant to accommodate the United States was also in synch with Beijing's perceived interests.

The planet, however, cannot wait. And the idea that one can deliver a U.S.-style middle-class lifestyle for the bulk of the world's population without provoking a climate crisis is a dangerous illusion. Until it finally gets up the courage to turn away from the globally destabilizing high-growth development path pioneered by the North, Beijing will be condemned to play the role of Hamlet in global climate politics. It will continue to demand flexibility as a developing country while covertly colluding to defuse tough climate measures that might obstruct its rise as an economic superpower. The world cannot afford this tragedy to be enacted on the global stage.

In contrast to their cautiously optimistic forecasts about a sustained recovery at the end of 2009, the dominant mood in liberal economic circles as 2010 draws to a close is gloom, if not doom. Fiscal hawks have gained the upper hand in the policy struggle in the United States and Europe, to the alarm of spending advocates like Nobel laureate Paul Krugman and Financial Times columnist Martin Wolf who see budgetary tightening as a surefire prescription for killing the hesitant recovery in the center economies.

But even as the U.S. and Europe appear to be headed for deeper crisis in the short term and stagnation in the long term, some analysts profess to discern a “decoupling” of East Asia and other developing areas from the western economies. This trend began in early 2009 on the strength of the massive Chinese stimulus program, which not only restored China to double-digit growth but swung several neighboring economies from Singapore to South Korea from recession to recovery. By 2010, Asia’s industrial production had caught up with its historical trend, “almost as if the Great Recession never happened,” as the Economist put it.

Are the U.S., Europe, and Asia really going their separate ways? Is “decoupling” really taking place?

The Triumph of Austerity

In the center economies, outrage with the excesses of the financial institutions that precipitated the economic crisis has given way to concern about the massive deficits that governments incurred to stabilize the financial system, arrest the collapse of the real economy, and stave off unemployment. In the United States, the deficit stands at over nine per cent of gross domestic product. This is hardly a runaway deficit, but the American right managed the feat of making the fear of the deficit and federal debt a greater force in the mind of the public than the fear of deepening stagnation and rising unemployment. In Britain and the United States, fiscal conservatives gained a clear electoral mandate in 2010 while in continental Europe, a more assertive Germany put the rest of the Eurozone on notice that it would no longer subsidize the deficits of the monetary union’s weaker Southern-tier economies such as Greece, Ireland, Spain, and Portugal.

In the U.S., the logic of reason gave way to the logic of ideology. The Democrats’ impeccable rationale that stimulus spending was necessary to save and create jobs was no match for the Republicans’ heated message that more stimulus spending added to President Obama’s $787 billion 2009 package would be one more step towards “socialism” and the “loss of individual freedom. “ In Europe, Keynesians argued that fiscal loosening would not only help the troubled economies of Southern Europe and Ireland but also the powerful German economic machine itself since these economies absorbed German exports. As in the U.S., solid rationale proved no match for provocative image, in this case, the media-disseminated portrayal of thrifty Germans subsidizing hedonistic Mediterraneans and spendthrift Irishmen. Germany has grudgingly approved bailout packages for Greece and Ireland, but only on condition that the Greeks and Irish are subjected to savage austerity programs that have been described by no less than two former high-ranking German ministers writing in the Financial Times as having a degree of social pain “unheard of in modern history.”

Decoupling Revived

The triumph of austerity in the U.S. and Europe will surely eliminate these two areas as engines of recovery for the global economy. But is Asia indeed on a different track, one that would make it bear, like Sisyphus, the burden of global growth?

The idea that Asia’s economic future had been decoupled from that of the center economies is not new. It was fashionable before the financial crisis dragged down the American economy in 2007-2008. But it was shown to be a mirage as the recession in the US, on which China and the other East Asian economies were dependent to absorb their exports, triggered a sudden and sharp downturn in Asia from late 2008 to mid-2009. This was the period that produced television images of millions of Chinese migrant workers being laid off in coastal economic zones and heading back to the countryside.

To counter the contraction, China, in panic, launched what Charles Dumas , author of Globalization Fractures, characterized as a “violent domestic stimulus” of 4 trillion yuan ($580 blllion). This came to about 13 per cent of gross domestic product in 2008 and constituted “probably the largest such program in history, even including wars.” The stimulus not only pulled China back to double-digit growth; it also pushed the East Asian economies that had become dependent on it to a steep recovery even as Europe and the US stagnated. It was this remarkable reversal that led to the renaissance of the decoupling idea.

The ruling Communist Party of China has reinforced this notion by claiming that a fundamental policy shift to prioritizing domestic consumption over export-led growth has taken place. But upon closer examination, this contention appears to be more rhetorical than real. In fact, export-led growth remains the strategic thrust, a fact that is underlined by China’s continuing refusal to let the yuan appreciate, a policy that is geared to keeping its exports competitive. The push-domestic-consumption phase appears to have ended, with China, as Dumas notes, “in the process of shifting massively from the beneficial stimulation of domestic demand to something closely resembling business as usual, circa 2005-07: export-led growth with a bit of overheating.”

It is not only Western analysts like Dumas that have pointed to this return to export-led growth. Yu Yongding, an influential technocrat that has served as a member of the monetary committee of China’s central bank, confirms that it is indeed back to business as usual: “With China's trade-to-GDP ratio and exports-to-GDP ratio already respectively exceeding 60 percent and 30 percent, the economy cannot continue to depend on external demand to sustain growth. Unfortunately, with a large export sector that employs scores of millions of workers, this dependence has become structural. That means reducing China's trade dependency and trade surplus is much more than a matter of adjusting macroeconomic policy.”

The retreat back to export-led growth is not merely a case of structural dependency. It is a case of a set of interests from the reform period that, as Yu puts it, “have morphed into vested interests, which are fighting hard to protect what they have.” The export lobby, which brings together private entrepreneurs, state enterprise managers, foreign investors, and government technocrats, is the strongest lobby in Beijing. If the justification for stimulus spending has been trumped by ideology in the US, in China the equally impeccable rationale for domestic-market-entered growth has been trounced by material interests.

Global Deflation

What analysts like Dumas refer to as China’s “reversion to type” as an export-oriented economy will clash with the efforts of the U.S. and Europe to push recovery through export-led growth while raising barriers to the inflow of Asian imports. The likely result of the competitive promotion of this volatile mix of export push and domestic protection by all three leading sectors of the global economy at a time of relatively less buoyant world trade will not be global expansion but global deflation. As Jeffrey Garten, former US undersecretary of commerce under Bill Clinton, has written: “While so much attention has focused on consumer and industrial demand in the US and China, the deflationary policies enveloping the EU, the world’s largest economic unit, could badly undermine global economic growth…The difficulties could cause Europe to redouble its focus on exports at the same time that the U.S., Asia, and Latin America are also betting their economies on selling more abroad, thereby exacerbating already-high currency tensions. It could lead to a resurgence of state-sponsored industrial policies, already growing around the world. And together, these factors could ignite the virulent protectionism that everyone fears.”

Crisis of the Old Order

What is in store for us in 2011 and beyond, Garten warns, is “exceptional turbulence as the waning days of the global economic order we have known plays out chaotically, possibly destructively.” He projects a pessimism that is increasingly capturing sections of the global elite that once heralded globalization but now see it disintegrating before their eyes. This resigned fin de siècle mood is not a western monopoly; it is shared by the influential Chinese technocrat Yu Yongding, who claims that China’s “growth pattern has now almost exhausted its potential.” The economy that most successfully rode the globalization wave, China “has reached a crucial juncture: without painful structural adjustments, the momentum of its economic growth could suddenly be lost. China's rapid growth has been achieved at an extremely high cost. Only future generations will know the true price.”

Progressives in the Conjuncture

In contrast to the apprehensiveness of establishment figures like Garten and Yu, many progressives see turbulence and conflict as necessary accompaniments of the birth of a new order. Workers have indeed been on the move in China, where significant wage gains were won in strikes in selected foreign companies in 2010. Protesters are indeed out in Ireland, Greece, France, and Britain. Unlike in China, however, they are marching to preserve what rights they have left. And neither in China nor the West nor elsewhere are most of those resisting carrying an alternative vision to the global capitalist order. At least, not yet.