I mean, sure, go with that. But it doesn't negate the irony.
That story worked out fine until US companies started sending all their IP over to China for manufacturing which resulted in 3 key outcomes that broke the initial strategy:
1. It funded and supported the buildout of China's manufacturing base. China now has the best manufacturing base in the world, and in some cases is the only place in the world certain things can be feasibly made.
2. It guaranteed an export market for Chinese goods which helped to drive their economic engine.
3. It allowed unfettered industrial espionage. There is a reason that nearly every product in existence has a Chinese clone/counterfeit available within a week of launch.
The strategy failed, because the Great Firewall only keeps information out of China that the government wants kept out of China, but any other information goes in, but it prevents pretty much all information from flowing out. Firewalls are not binary, they are tunable with policy, and the Chinese government has historically had a strong strategy and nuanced policy, which has allowed them to see great economic success despite reducing freedom of information. Fundamentally, it's economics that drives the rise and fall of governments.
That's how capitalism works. And it worked extremely well and to most everyone's benefit.
This is not the same thing as copying China's approach to the world
Reciprocation is rational and good
I do agree with you though that the capitalism=democracy experiment was a pretty obvious failure. You can have pretty free markets with or without democracy. The US emerged from the Cold Wa with ideological battle scars which prevent us from doing what’s best for the people because that might be communism. We are gradually finding out that concentrated corporate power is potentially an even greater threat.
It seems fairly clear to me why this is the case: complex, conflict-prone relationships often involve prisoner's dilemmas, and alignment on fundamental principles is an effective method for avoiding the worst-case outcome of a prisoner's dilemma. Abandoning principles for a purely situational approach to conflict makes the presumptive lose-lose outcome much more likely.
As far as prisoner's dilemmas, its a lot more complicated than that. A purely pragmatic approach can lead to win-win outcomes that would be impossible in a purely idealist framework - realist IR scholars would, for example, argue (and could back it up far better than the alternative) that if it wasn't for Bush and Cheney's idealism, the 2003 Iraq war would never have occurred.
The realist counterpoint to the prisoner's dilemma is that it's not just due to conflict prone relationships, but because it's impossible to know what the intentions of other actors are, which is not something that international liberalism can solve in practice. In theory, liberalists would argue that two liberal states can communicate their true intentions well because their intentions reflect the intentions of the population, but this has conclusively been proven to be untrue in the case of foreign policy (not very surprising due to the way intelligence has to be set up), and therefore the liberalist rebuttal to uncertainty of intentions seems much weaker now than it did originally.
As a result, realists argue that following realpolitik can actually reduce the likelihood of war, as agents will be careful to act in such a way as to avoid seeming as to pose a threat in the absence of knowledge of their intentions, while a liberal actor, acting according to their ideals, would act in a way such that an actor who is unsure of their true intentions would have to perceive as a threat.
This means that you just can't assert easily that realism is more likely to cause lose-lose outcomes. It's a complicated argument where this kind of ironclad certainty just isn't justifiable.
why do you believe so?
i see no reason why rationalism and political pragmatism are mutually exclusive with liberalism. in fact to me it seems they complement each other well
While that might arguably be compatible with liberalism within a society where there is a relatively benevolent monopoly of power imposing a certain number of rights and rules molding the self-interest of all in such a way as to be compatible with civilization, within the international system there is no monopoly of violence, and therefore norms and rights are contingent on countries not acting purely in their self-interest and therefore to maximize their power.
Since modern liberalism is inherently internationalist (arguably since Woodrow Wilson, some called his approach to diplomacy "idealpolitik"), modern liberalism does have to reject realism as a school of thought.
The debate between liberalism and realism as it pertains to international politics is the main topic of contention in international relations theory.
More generally, you can also argue that liberalism assumes the good faith of powerful people not to destroy the liberal system to maximize their own power, but this is far easier to argue against in the domestic setting than in the international setting.