Picto Diary - 23 October 2018 - Niall Ferguson, Hoover Retreat
NIALL FERGUSON. Hoover Fellow. Speaker. Hoover Retreat. Stanford University. 23 October 2018
Note: Note taker fallible. In the following notes, mistakes are mine.
THUCYDIDES TRAP
We have to be careful not to get into a Thucydides Trap with China. Thucydides, a Greek historian, argued that the cause of the Peloponnesian War was "the growth of Athenian power and the fear which this caused in Sparta." In other words, as one power rises, an already established power gets nervous and gears up for war, with this devolving into a vicious cycle that eventually results in war.
The world is more complex today. There are multiple kinds of wars. Here are five:
Trade
Currency
Information/Cyber
Conventional
Nuclear
Nuclear war or conventional war with China is conceivable, but, not likely. In this sense, we will in all probability avoid the Thucydides Trap. But, trade wars and information wars are likely to escalate, rendering Thucydides prescient in ways he could not have anticipated.
US TRADE WAR WITH CHINA
America's trade war with China has its origin in a currency war. For the last thirty years China has undervalued its currency do so as to attract manufacturing and advantage its exports.
China has also bent WTO rules.
Measured by purchasing power, China's GDP already exceeds that of the United States. In US dollar terms, China's GDP won't exceed US GDP for another ten years.
China's "shock" to US jobs explains Trump's campaign pledge in 2016 to enact punitive tariffs on Chinese imports.
Currently, China's economy is hurting as a result of tariff war. During the last four months, the Shanghai Stock Exchange index has declined by over 20% where, over the same period, the S and P has grown by 5%.
US didn't start the China trade war, notwithstanding the declarations of the Der Speigle, Euro America haters. China started the trade war with her currency manipulations and technology pirating.
The American voter understood the perfidy of China's actions better than America's policy makers and, in 2016, voted for a tectonic shift in America's China policy.
Before, the mantra was free trade. Now, the mantra is fair trade.
Trump doing what he said he'd do on tariffs.
The US wins the trade war with its China tariff policy. US economy growing solidly. Also, US is less dependent on international trade than is China.
China has introduced "tit for tat" tariffs aimed at the Trump base. It hasn't worked.
China will be tempted to resume currency manipulations, but this will put enormous pressure on capital flight. China is not likely to escalate currency imbalances.
The trade war will escalate. We're now "in the '70's" Trump can be expected to ratchet more against China.
The trade war could mutate into "Cold War Lite."
Mike Pence gave a speech on 04 October 2018: Here's an excerpt:
"Beijing is employing a whole-of-government approach, using political economic, and military tools, as well as propaganda, to advance its influence. Chinese security agencies have masterminded the wholesale theft of American technology - including cutting-edge military blueprints. China wants nothing less than to push the USA from the Western Pacific and attempt to prevent us from coming to the aid of our allies. But, they will fail.""
INFORMATION WAR WITH RUSSIA
The Information War was started by Russia. Russia's objective is to sow division and polarization in American society.
Yet, medium to longer term, China is the greater threat to the United States in the information war.
Notwithstanding Pay-Pal and others, China's e-commerce dwarfs that of the United States. There is a real threat that China can roll out her payment platforms to the world faster than we can get our platforms out there. This represents a real threat to the dominance of the US dollar as the "world's currency."
China or Russia... we don't have a doctrine for cyber defense (or offense) in "Cold War Lite."
Q and A (highlights)
Europe speaks with forked tongue. There is widespread European institutional hate of Trump. Yet, talk quietly to the European on the street and you are more likely to hear, "Go Trump!
Probability that Meuller derails Trump presidency is low.
Addendum:
I agree with his very last thought.
An emerging puzzle is “What to Teach” to meet what I call “The Challenge of the Century.”
Jack Aroon,
Mahwah, NJ
<< China has a huge trade surplus thanks to their unfair currency manipulation>>
Thank you for the write up—wish I could have been there.
This line should have said”
<< China has a huge trade surplus thanks to their production of great, competitively-priced merchandise that leads the world in quality and pricing. >
Cornucopia,
Park City, UT