Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

My Thoughts

There is no Cold War II

There is no Cold War II between the United States and the People’s Republic of China. Conversely, a dangerous conflict between the USA and the People’s Republic is developing.

The First Cold War was an ideological and strategic conflict between the United States and the Soviet Union. The similarities between the current US/China tensions and the First Cold War are superficial.

Yes, China is a rising power, and it is challenging the dominant United States. Moreover, the People’s Republic is a Leninist dictatorship ruled by a Communist Party. Yet the People’s Republic is not the Soviet Union, and the modern United States is not 20th Century America.

China is not the Soviet Union

The Soviet Union was a militaristic empire that aggressively embraced and promoted a radical Communist ideology. The modern People’s Republic is a pragmatic authoritarian technocracy that pays lip service to Marxism.

The Soviets had an aggressive program of militarization and conquest. The People’s Republic has no agenda of conquest and is notably non-militaristic. For instance, there was no military parade or display in the recent 100th Birthday Party for the Chinese Communist Party.

Soviet leaders viewed military might as the ultimate power. Modern Chinese leaders view science, technology, knowledge, and money as the ultimate power.

Hence, Chinese leaders believe the conflict with the United States is economic, technological, scientific, and financial. They expect to fight America in the markets, in the laboratory, and on the factory floor, not on the battlefield.

Moreover, Chinese leaders do not see the United States as a threat to China or their power. In contrast, Soviet leaders viewed the United States as a direct threat to Russia and their power.

The First Cold War

The First Cold War began because Soviet dictator Joseph Stalin and his heirs saw the United States as a threat to the USSR.

In addition, Stalin believed there was a state of war between the US and the USSR as soon as World War II ended. Similarly, some Soviet leaders, including Stalin, Khrushchev, and Brezhnev, believed war between the United States and the Soviet Union was inevitable.

Thus, Soviet leaders before Andropov and Gorbachev believed peace between the USA and the USSR was impossible. Hence, the Kremlin made frantic and massive preparations for war. Predictably, Soviet leaders interpreted every American move as a threat to them.

Oddly, many Americans shared the Soviet’s paranoia. The 20th Century American paranoia came the 1941 Japanese attack on Pearl Harbor. At Pearl Harbor, a country at which the United States was legally at peace launched a destructive sneak attack that crippled the US Navy.

After Pearl Harbor, many Americans lived in constant fear of a sneak attack. Soviet behavior, in particular, the adventure in Cuba, the Berlin Wall, and the massive military parades in Red Square reinforced those fears.

Today’s Conflict

The present Chinese-American conflict arose from calculations made by both nations’ leaders in the early 21st Century.

Around 2001, Chinese leaders made two calculations that explain their country’s present foreign policy. First, the Chinese decided the United States was not as stable or as reliable as most observers thought.

Second, Chinese leaders guessed America’s internal problems would keep the United States from engaging in Cold-War style geopolitical interventions. Hence, the Chinese figured the United States would confine its intervention to the War on Terror and the Middle East.

The Chinese leaders’ calculations proved correct. The United States has been unstable and has limited its military adventures to the Middle East and Afghanistan.

At the same time, American leaders made two calculations about the world. History proved one of those calculations correct, and one wrong.

First, American leaders assumed no power could challenge the United States as a global leader for at least a generation (25 years). This calculation proved wrong. China rose to a position to challenge America in less than 20 years.

Second, American leaders assumed the United States would face no great geopolitical or military challenge for at least a generation. The second assumption proved correct. The United States has not faced a serious geopolitical challenge since the collapse of the Soviet Union.

The First Calculation explains the American elite’s embrace of free trade and Chinese imports. American leaders assumed Chinese industry was not a threat to US manufacturing. That calculation proved tragically wrong.

The Second Calculation shows why American leaders pay no attention to Chinese moves such as the Belt and Road Initiative. Nobody in the United States seems to be concerned about Chinese plans to route a sea corridor through the Panama canal and build a port on the West Coast of Peru.

Thus, both the United States and China could stumble into a conflict. Unfortunately, nobody understands that conflict and knows how it will play out.

The Shadow of the Cold War

One reason for the lack of understanding is that no living politician, diplomat, or strategist has any experience with an international situation like the one we face today.

To explain, the modern international situation is one of several great powers engaging in non-ideological competition. The world has not seen that reality since before World War I, over 106 years ago.

Hence, there is no plan or playbook for the competition. Instead, American, Chinese, and Indian leaders seem to be making things up as they go along.

Additionally, Cold War memories pervert American thinking about China’s rise. Many Americans’ response to China’s growing power is to prepare for Cold War II.

One motivation for the New Cold War thinking is Cold War Nostalgia. We often forget that many Americans have fond memories of the First Cold War. In particular, the Cold War was the last time many middle and working-class Americans enjoyed rising incomes and improving lifestyles.

Plus, the Cold War was fun for many Americans. Many Americans, including my father, enjoyed their Cold War military service in Europe or Japan. Neoconservatives in particular love the thrill and the sense of purpose the conflict with the Soviets provided.

Hence, some Americans want to relive their youth, or their parents’ youth, by launching a New Cold War. Others think a New Cold War could give America a new sense of purpose or unity.

I do not think the Chinese leaders plan to fulfil the New Cold Warriors’ wishes by launching a new arms race or building a naval base in Cuba. Instead, the Chinese will challenge America, with TikTok, video games, cryptocurrency, venture capital, and bases on Mars and the Moon that American tourists can visit.

The United States is not prepared for that kind of friendly rivalry and direct economic challenge. In particular, American leaders do not how to deal with a rival that does not want an arms race.  

The challenges are dangerous because either country could stumble into a war. For example, some destroyer captain or fighter jock could start World War III by stumbling on a Chinese or American warship in a surprising place and opening fire. For example, an American frigate making a call at a Chinese port or a Chinese submarine cruising the Caribbean.

We are not facing a Second Cold War. Instead, we are living in an interesting and dangerous new time few people seem to understand.