The Advent of the “Lose-Lose” World

It’s time to abandon the notion that every battle has a winner. It’s possible for both sides to lose, and we are seeing evidence of that in the deteriorating US-China relationship. As the world order continues to shift, we will likely see an intensification of this “lose-lose” dynamic. Take the newly proposed Hong Kong national security law and its global reaction as an example.

This new national security law will very likely dissolve judicial independence and press freedoms in the Hong Kong SAR. The legislation will likely erode long-term business confidence in Hong Kong as well. China’s senior leaders are surely aware that eliminating these freedoms could deter foreign investment. However, the fear of irreversible political instability in its offshore financial center outweighs considerations for maintaining the “one country, two systems” policy. The long-term economic fallout of Beijing’s actions will play out over time, but the immediate strike against liberal values is immediately apparent.

Conversely, it seems natural to paint Hong Kong as the victim, but it’s not clear that’s the case. Beijing would not have been forced to take such drastic action if not for the erratic and violent reaction of Hong Kong’s pro-democracy youth protestors. The small minority of violent protestors alienated moderate Hong Kong citizens, and likely accelerated and intensified the central government response to all dissent. The protest leaders failed to prove that they are capable of restoring business confidence in Hong Kong and stabilizing its floundering economy.

The end result is a world that is stuck in a cycle where no side is willing to compromise. Under these conditions, no one really gets what they want. Hong Kong wants autonomy, but the more it pushes back against China’s central government, the less freedom it will have. China still wants Hong Kong as an offshore financial center, but the more control it exercises over Hong Kong, the more it damages business confidence. There are no heroes or villains. All that remains is a result no one is thrilled with.

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