Cold War II: Niall Ferguson on The Emerging Conflict With China | Uncommon Knowledge

Key Concepts

• Cold War II (vs. Cold War I)
• Correlation of Forces (Stalinist/Marxist-Leninist concept)
• Strategic Ambiguity (regarding Taiwan)
• Taiwan's geopolitical importance
• China's economic and technological rise
• The "American Suez"
• The "Taiwan Semiconductor Crisis"
• Containment strategy
• The Global South
• The Chinese Model (authoritarian capitalism)
• Technological Innovation Race
• Deterrence

Cold War II: A More Formidable Adversary

• Main Argument: The emerging conflict with China is not just a continuation of the Cold War, but a new and more dangerous phase.
• Economic Power: China's economic power is significantly greater than the Soviet Union's ever was. By 2014, China's GDP (PPP) surpassed the US, while the Soviet Union's peak was only 44% of the US economy.
• Technological Advancement: Cold War II involves advanced technologies like AI and quantum computing, alongside nuclear weapons, making it more complex and potentially destructive.
• Interpenetration: Unlike Cold War I, there's massive social and economic interpenetration between the US and China, making intelligence gathering easier for China.
• Kissinger's Perspective: Henry Kissinger believes that Cold War II is more dangerous than Cold War I. He initially described the situation as being "in the foothills of a cold war" in 2019, upgrading it to "the mountain passes of a cold war" in 2020. By last year, he considered it a given that we are in Cold War II and that it would be more dangerous than the first.

Taiwan: The Focal Point of Conflict

• CCP's Position: The Chinese Communist Party (CCP) views Taiwan as a part of China that should be under its control.
• Recent Events: China responded to the Taiwanese president's visit to the US (and meeting with House Speaker Kevin McCarthy) with military exercises, including "nuclear-capable bombers armed with live missiles and warships staging drills to form an island encompassing blockade situation."
• Strategic Importance: Losing or not fighting for Taiwan would signal the end of American predominance in Asia, potentially causing a run on the dollar and US Treasuries, leading to an "American Suez."
• Strategic Ambiguity: The US has maintained a policy of strategic ambiguity regarding Taiwan since the late 1970s, neither explicitly recognizing Taiwan's independence nor ruling out military intervention if China uses force.
• Shift in Attitude: Since around 2018, the US has adopted a tougher stance on China and Taiwan, with President Biden seemingly repudiating strategic ambiguity on multiple occasions.
• Taiwan's Drift Away: The Taiwanese population, especially younger generations, has moved steadily away from the mainland, identifying more with their democratic system.
• Xi Jinping's Ambition: Xi Jinping views bringing Taiwan under CCP control as the crowning achievement of his career, justifying his extended term as president.
• Urgency: General Mike Minihan predicts a potential conflict in 2025, citing the US and Taiwan's presidential elections in 2024 as potential triggers.

Ukraine: The First Hot War of Cold War II

• Analogy to Korean War: The war in Ukraine is seen as the first hot war of Cold War II, analogous to the Korean War in Cold War I.
• China's Support for Russia: Putin would not have invaded Ukraine without a green light from Xi Jinping and continues to receive substantial economic support from China.
• Potential Stalemate: The war in Ukraine is likely to continue with serious fighting, attrition, and eventual stalemate, similar to the Korean War.
• Taiwan Semiconductor Crisis: The situation with Taiwan is compared to the Cuban Missile Crisis, but with the US in the position of the Soviet Union, facing a potential blockade by China.

Taiwan's Defense and the Question of Seriousness

• Low Defense Spending: Taiwan's defense spending is barely over 2% of its GDP, compared to Israel's 5%, raising questions about its seriousness in defending itself.
• Free Riding: Taiwan may be "free riding" on the US security guarantee, similar to other countries during Cold War I.
• Taiwanese Identity: Despite the official "One China" policy, the Taiwanese people largely do not identify as Chinese and are on a road to independence.
• Ukraine as a Distraction: Some argue that Ukraine is a distraction from the more critical issue of Taiwan, while others believe that the defense of Taiwan runs through Ukraine.

The Global Nature of Cold War II

• Three Body of Water Problem: The US must be ready to deter its foes in Europe, the Pacific, and the Persian Gulf simultaneously.
• Resource Depletion: The more resources the US puts into the Ukraine war, the fewer it has available for a potential conflict in East Asia.
• Limited War Unlikely: A limited war over Taiwan is hard to imagine, as it could escalate quickly.
• Empty Bins: A recent report highlighted that the US would rapidly run out of essential supplies, particularly precision missiles, in a war over Taiwan.

Ideology and Innovation

• Marxist-Leninist Ideology: The CCP is still driven by Marxist-Leninist ideology, which influences its belief in an inevitable collision with the "imperialist West."
• Innovation Race: The US and China are engaged in a technological innovation race, with the US needing to protect its intellectual property and maintain its lead.
• Immigration as a Superpower: The US's ability to attract and integrate talented immigrants is a key advantage in the innovation race.
• Failure to Innovate: China failed to develop effective vaccines against COVID-19, highlighting the limitations of its system.

The Appeal of the Chinese Model

• Authoritarian Capitalism: China has created a new model of authoritarian central control combined with free markets, lifting millions out of poverty.
• Fellow Travelers: Some individuals, particularly former or current Marxists, find the Chinese system attractive.
• Appeal to the Global South: The Chinese model appeals to developing countries in Africa, Latin America, and the Middle East by offering surveillance technology and infrastructure development.
• Huawei's Influence: Huawei's presence in developing countries creates a "Cold War map," with the US and its allies rejecting Huawei's technology while other countries embrace it.

Scenarios for the Future

• World War III: A disastrous scenario involving a head-to-head conflict over Taiwan or elsewhere, escalating to nuclear war.
• American Suez: A scenario where the US folds in a showdown, losing its dominance in the Indo-Pacific region and experiencing currency depreciation.
• Chinese Dominance: A world under Chinese dominance would be characterized by a lack of individual and human rights, as seen in the treatment of Uyghurs in Xinjiang.
• Containment: A more plausible scenario where the US actively works to prevent the expansion of Chinese power in multiple theaters, focusing on maintaining technological leadership.

The Need for Unity and Deterrence

• Internal Division: The US's vulnerability lies in its capacity for internal division, as seen during the Vietnam War era.
• External Foe: An external foe can help unite Americans and provide a clear geopolitical project.
• Bipartisanship on China: There is surprising bipartisanship in the US regarding the challenge posed by China.
• Demographic and Economic Challenges in China: China faces demographic challenges (declining population) and economic problems (overreliance on real estate).
• Legitimacy Issues: The CCP faces legitimacy issues, which may drive its hawkish stance on Taiwan.
• Buying Time: The US should buy time and avoid a reckless showdown over Taiwan, similar to how Henry Kissinger's policies bought time during the Cold War.
• Investing in Deterrence: The US must invest in deterrence to prevent a major conflict, as it is cheaper than fighting a world war.

Conclusion

The conversation paints a stark picture of a rapidly escalating Cold War II with China, far more complex and dangerous than its predecessor. Taiwan emerges as the central flashpoint, demanding a careful balance of deterrence and strategic patience. While China presents a formidable challenge, the US retains key advantages in innovation and the ability to attract global talent. The ultimate success hinges on internal unity, a clear understanding of the ideological underpinnings of the conflict, and a willingness to invest in the long-term competition for global influence.