Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

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China is a Rich Society. No Western Country Is.

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On August 20, 2025

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Chinese and American flags flying together

Saw this recently, from the University of Chicago:


The commentary is a bit of an exaggeration. But not too much.

Now if this was just one data point, it wouldn’t matter, but the bottom line is that funding for universities, including university research, in being massively cut in America and the UK, with issues in most Western countries. It’s not just about the humanities, science is getting hit hard, as is engineering.

As best I can tell, China has opened about 1,700 new universities and colleges in the past 25 years. Those that existed have expanded enrollment. It’s very reminiscent of the post war period in America. And the best of universities are excellent.

Americans are ostensibly rich, yes, but the society is not. A lot of the apparent wealth is false: if it costs one fifth as much to get dental or health care or one tenth as much to buy a good pair of earphones; if it costs one-third as much to buy an electric car, well, all of the extra cost in America goes to GDP, and Americans have higher incomes, but who’s actually richer?

And when you look at Chinese cities and provinces they are building infrastructure massively. The cities are beautifully lit up at night. There is a huge space program, even as the American space program is cut, and cut and cut. There are dozens of EV companies and in general there is competition in most of the cutting edge parts of the society. Coffee is cheaper (which is why Starbucks is getting shellacked in China). Everything is cheaper, there’s more of it and the government and private actors spend money on huge new projects, on research and on infrastructure.

China is a rich society, because they can do things. America’s last real gasp as a rich society was the Apollo program, ever since then, it’s been in retreat. Europe, well, Europe had a good time in the post war period, but since then, despite some success in the 90s and early 2000’s, it’s been in retreat and it has recently chosen the path of de-industrialization and xenophobic isolationism, which is not going to serve it. University cuts in the UK, in particular, have been savage, but Europe, even taken as a whole is behind China, the US, Japan and South Korea in research and technological advancement.

 

 

The Chinese have built massive high speed rail, lead in civilians drones, in robotics and are competitive in AI, which is 20x cheaper to run (more importantly, it uses FAR less energy than American AI, which draws more energy than entire countries.) They are ahead in most material sciences, catching up in civilian aviation (soon they will be ahead), have vastly more shipbuilding capacity, are ahead in missile technology, will soon eat SpaceX’s lunch  in launch costs (no, I will not be wrong about this.)

China does thing. The government is rich. Corporations are not spending all their money in stock buybacks and acquisitions, but are actually competing and trying to create new and better products than their competitors.

The best parallel is probably not post-war America, but pre-WWI America. China has taken the lead from America, there is zero chance of America catching up absent a large meteor hitting China, but they don’t actually spend much on their military. I was shocked to find out that the Chinese military has about 2.2 million soldiers out of a population of 1.4 billion. All of this with a sincere effort to provide a decent standard of living to everyone and a genuine attack on inequality. (Chinese inequality is very high, but it is concentrated in the top 10%, not the top .01%, which is being attacked by the government.)

China is a civilian society, with a civilian economy. It is in a vastly expansive phase, one which could last as much as sixty to eighty years, assuming environmental or international issues don’t derail it. (They will.)

China is where the future is. If you are younger, learn Mandarin. It will be as essential as English was for the past hundred and twenty years.

Hope for the future now rests in China. You may not like that, but it’s just a fact. They’re the country that can actually do things, and whether our problems are fixed, or mitigated (more likely) is up to them, just as for a long time it was up to the US (which failed almost completely, play “I see no evil, I hear no evil” every since 1980.

I don’t know if I for one welcome our Chinese overlords, but it doesn’t matter. They’re here. The West has already lost the race and is retreating into a poorer, more backwards second world situation, similar to the late USSR and Warsaw Pact.

It will end as well for the US and NATO as it did for the USSR and the Warsaw Pact.

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Trump’s Budget & The NATO 5% Of GDP Requirement Have The Same Effect

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On August 18, 2025

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Despite all the flakiness and back and forth Trump’s actions have a unified purpose. Like the Democrats, but even more so, they disproportionately benefit the rich. (We’ll leave aside the pandemic response, which is complicated and an emergency.)

This table is older, and based on the House version of Trump’s budget and tariffs, but should be substantially correct:

Tariffs effect the rich less, because they spend less of their income on goods. The biggest companies often get exceptions to the tariffs as well. Currently that includes Apple, Coca-Cola, Stellantis and GM.

We are also seeing signs of “Greedflation”, using the tariffs as an excuse to raise prices faster than costs. This was huge during the pandemic,and it will be huge this time. Overall the really reach will benefit from tariffs, not be hurt by them. Trump talked a good game about making sure companies wouldn’t use tariffs as an excuse to raise prices, but that’s all it was, talk. For tariffs to improve the lives of the working and middle class, they would have to translate into well paid jobs, and there is no effective mechanism for that in America.

Let us turn then to the “NATO nations must spend 5% of GDP on their military.” That’s a lot, and it means that either taxes must be raised (they won’t be except for consumption taxes on the poor) or other priorities must be slashed. So the poor and middle class in those countries will get it in the neck.

Now, if that 5% was spent on domestically produced weapons and on hiring more soldiers and support staff, at least it would get back into recirculation. Indeed, there’ll be some of it, but most countries have agreed to buy Americans weapons and equipment.

And who will that benefit the most? The American rich.

In some cases buying American is so foolish it boggles the mind. Canada’s only real active military threat is America, and American weapon systems these days are mostly online and can’t be used if America doesn’t want them to be, even leaving aside the possibility of simply bricking them with an update.

But in general, increased military spending was an opportunity for industrial policy and to cut the aprons to the US, and actual statesmen would smile at Trump, make the promises and use the 5% in ways that would benefit their own country. Instead most of the benefits will flow to America.

As for the idea that America is a reliable security partner, well, they couped Ukraine, built its army up massively, encouraged it not make peace when easy and favorable terms were offered and is now cutting a deal with Russia after extorting mineral concessions from Ukraine.

Never ally with America if there is any other option.

But the core point here is simply that the “does it make the rich even richer” metric, which works for American politicians as a group, is even more predictive of Trump. Oh sure, he’ll throw the hoi polloi some social policy red meat, and yes, some of the moderately rich are being hurt by his policies, but the real rich, they’ll mostly make out like bandits.

Until China eats their lunch, which they are and will.

Right now America’s policies appear to be “loot the satrapies and form a non-Chinese bloc which is smaller, weaker and poorer than the China bloc.”

Smells like the USSR to me, except the USSR started out very strong and with higher economic growth than the West. America is trying the strategy as its in terminal decline.

 

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“Art of the Cave”: Trump Walks Back China Tariffs For 90 Days

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On May 12, 2025

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Well, maybe. Who the hell knows what he’ll do. Anyway, tariffs are back to 30% on China and 10% on America.

This is exactly what China demanded, for tariffs to go back to what they were before April 2nd.

There will still be a two month trade burp. Ships weren’t leaving China for the US at all, literally zero. Lot of freight companies are about to make a mint, though. So expect some shortages, but nothing worse than Covid, and hopefully lasting less time.

The fundamental problem remains, however, which is that there’s no certainty around any of this, so business people can’t make long term plans, including plans to build or relocate manufacturing. Trump and the US can’t be trusted to stay steady on policy, so avoiding making big plans involving the US makes sense.

The Great Power picture is clearer, however. The US tried to impose its will on China and failed. China wouldn’t negotiate till its pre-conditions were met. The world has two great powers, with the EU bidding to become the third (I think they’ll fail, but that’s what the rearmament is about.)

And, in economic terms, China is by far the pre-eminent great power. It isn’t even close. The era of American hegemony is officially over. The US tried to impose its will on the world and failed.

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Canada’s Future & The New Carney Government

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On April 29, 2025

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Mark Carney

Carney has won a minority government. He will have to govern with the support of the NDP. The NDP was slaughtered in this election, and there were a few ridings where people strategically voting for the Liberals actually led to the Conservatives winning. Iit’s worth pointing out that the Conservatives increased their seat count, which is why Poilievre is sticking around as leader, despite losing the election and his own seat. (A loyal MP will stand down and let him run in a by-election in a safe riding.)

The NDP lost their official party status in this election and their vote percentage was cut in about half by strategic voting. They need to bargain hard with Carney in exchange for support and be willing to walk away. The most important thing, for them and Canada, is to change the voting system. Proportional would be ideal, but it’s unlikely the Liberals would go for it. They would probably go for ranked ballots, assuming, probably correctly, that they’ll be the most common second choice.

But it would also benefit the NDP and make it less likely for radical conservatives of the current variety to get into power.

If I were the NDP, I’d go to the wall for this. There’s likely to be more polarized elections in the future, because the Conservatives remain a Trumpist style party and a lot of natural NDP voters will keep going Liberal to try and block them. If they want to get back up to near 20% of the vote, this is necessary.

Now as to Canada’s future: it’s going to depend on whether Carney can actually deliver. If he can make Canadians better off and win another election, Poilievre is toast and Trump style conservatism will be discredited in Canada. If he doesn’t deliver: if effective wages don’t rise and if rent and housing prices don’t go down, then Poilievre or his successor’s Conservative party WILL win the next election, just based on disgruntled voters.

Carney’s talked a fair bit of sense: doubling building housing, pivoting to new trade partners and creating vertically integrated industries within Canada. If he can pull it off, he’ll go down as one of Canada’s greatest Prime Ministers. But, at the end of the day, Carney is a neoliberal, and his impulse to always cut taxes on the rich and so on is going to hold him back.

He also needs a full term to pull it off. A lot of pain is coming down the pike and the next couple years will be ugly.

And that means he needs to keep the NDP happy. If they stop supporting him before he turns things around (assuming he can) he’s toast, and the Conservatives are in. So the NDP may as well force him to do some other things: pharmacare and universal dental, probably.

It’s going to be an interesting few years for everyone. Carney was right when he said:

America wants our land, our resources, our water, our country. But these are not idle threats. President Trump is trying to break us so that America can own us. That will never, that will never ever happen...

…

Our old relationship with the United States, a relationship based on steadily increasing integration, is over. The system of open global trade anchored by the United States, a system that Canada has relied on since the Second World War, a system that well not perfect has helped deliver prosperity for a country for decades, is over. 

But it’s also our new reality.

We are over the shock of the American betrayal, but we should never forget the lessons. We have to look out for ourselves and above all we have to take care of each other.

The old system is over. Carney’s problem is that he doesn’t see that for a ton of Canadians the old system hasn’t been delivering for a long time.

Every country in the world will have to adapt to the new economic landscape. Some will succeed, others like Britain, will fail. It remains to be seen if Canada is one which adapts well. What is certain is that if Poilievre gets in, he will usher in a new era even worse than the old neoliberal one. He will be prostrate before the US, will slash the civil service, healthcare and so on and will turbocharge the oligarchy.

So Carney’s it. He wouldn’t have been my first choice, but if he doesn’t pull it off, no one will.

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Trump Has Made It Impossible For America To Resist China

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On April 24, 2025

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Chinese and American flags flying together

For a long time I thought the new world order would be a perverse mirror of the Cold War: two blocs facing off, periphery war, minimal trade between them (There was some trade, mostly in commodities.) The difference this time would be that the US was leading the weaker block, not the stronger.

Trump has made this very unlikely. His tariffs and threats have broken the unanimity of the alliance and vassal circle. The EU is in China right now seeking to cut a trade deal with the possible of end of many sanctions on the table. Canada’s presumptive PM has said the old order is dead. When China cut off US LNG who stepped into the gap? Australia and Canada. Even Japan, the most loyal of vassals, has noted that you can’t make a deal with Trump, because blackmailers always come back for more.

With the EU, Japan, South Korea, and the Anglosphere, the US had a credible trade and military bloc. Without them, there’s no goddamn way. They don’t even have to go over to China’s bloc, they just have to be neutral.

And that’s the way this is tending, economically, with signs that military is to follow. The EU is attempting to remilitarize and it is trying to stay away from American weapons as much as possible. Canada is reconsidering both Aegis and F-35s. And so on. Without allies to buy its weapons, the US mil-industry complex will wither. If Japan isn’t considering getting its own nuclear deterrent, it would be geostrategic malfeasance.

Trump thought that the US was still the essential nation. That if it put the pressure on, everyone else had to buckle. But those days are gone, and Trump’s stupidity is not only going to cost the US its empire, its dollar privilege and inflated standard of living, it is costing the US even its leadership position.

This is likely a good thing for the world, overall, though lack of some sort of secondary great power able to resist China somewhat will have costs.

But Americans will regret it bitterly.

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America Is Trying To Form An Anti-China Trade Bloc

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On April 10, 2025

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Trump backed off on most of his tariffs after Japan sold a ton of bonds and he panicked. He replaced most of the tariffs with a blanket 10%, and kept tariffs on China and Canada (because those countries had counter-tariffed the US, supposedly.) Now the report is that what US negotiators are demanding is that in exchange for avoiding US tariffs, other countries tariff China.

It should be noted, first, that China will not back down. The way Trump is framing this is “China will come to us” and sub-voce “beg” and that’s not happening, it would be a massive loss of face for Xi and for China and China is a “face” society. So massive tariffs on both sides will continue unless the US makes the first overtures and in a face saving way. The US rates on China are 125% and the Chinese rates on America are 85%.

These are nuclear levels and are going to bring trade damn-near to a halt. China has also put export bans on a number of companies for “dual use” techs: in practice, they’ve hit Lockheed and Boeing (big military aviation companies) so hard that I’m not sure those companies will be able to build planes, the supply chain is that China-centric and there are no alternatives.

(Aside: the criminally minded will be scrambling to smuggle into the US, and fortunes will be made, as they were during Prohibition. Those who wish to reduce criminal risks can just import Chinese goods to Canada and Mexico and sell them to whomever. “I don’t know officer, I don’t ask them why they want all those machine parts. Not my business.”)

It’s hard to say how this will play out, because:

  • Lots of western countries have a hate-on for China. European and Canadian politicians, early on in Trump’s regime, had suggested “why tariff us, let’s go after China together!”
  • But… that was then, and this is now. A lot has changed in three months. No one trusts Trump to keep deals any more and China is looking mighty stable. Even if you’d really rather do business with the US, like Europe, can you expect any deal to be kept?

I’m genuinely unsure how this will play out. My personal preference would be to tell the US and Trump to pound sand: they don’t keep their deals, so you just can’t do business with them no matter what the theoretical case is. (That case is mostly that it’s hard to compete with China, their goods are so cheap, whereas the US is sclerotic so you can sell them stuff, especially if they’re in a trade war with China and can’t buy cheap: charge them 2x as much and still come in under!)

If Trump had gone for this as the start, he would have gotten it. Canada and Europe would have fallen over themselves to join in. Now? Not so sure.

There’s a lot of “Trump is a genius and there is a PLAN” going around in MAGA circles. Bullshit. If this was Trump’s actual goal, what he did made it harder to achieve rather than easier. What actually happened is that Japan jerked the bond market’s chain and Trump backed down and is trying to pivot.

It’s not a completely stupid pivot, the West isn’t competitive against Chinese manufacturing, and one way to deal with that (a bad way, but still a way) is to just cut China out of Western markets and sell over-priced goods to each other.

Years ago I said that the way geopolitics were playing out was leading to a “New Cold War” — there’s an entire category on this blog, just on that.

Crunch time has come and we’ll see if it happens, and who’s on each side. Trump’s made America’s chances of putting together a strong coalition far weaker than they should have been, but anti-China fear and a refusal to end rentierism in the West mean that we can’t, actually, compete against China, so there’s still a strong temptation to form that anti-China bloc.

If so, we’ll be the weaker side, as the USSR/Warsaw Pact was last time and we will lose the new Cold war, falling further and further behind technologically and watching as the Chinese enjoy goods we can barely even dream of, just as was true of the late Soviet Union.

Everything, and I mean everything, will be sacrificed to keep the oligarchs in power, keep making them richer and keep the flow of unearned cash pouring into every rich person’s orifices.

Update: Seems that the EU and China are in talks to end EU tariffs on electric vehicles. That sound you hear is Elon Musk puckering up to kiss his ass goodbye.

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In The New Cold War, One Side Will Be Weaker and Less Prosperous

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On February 13, 2025

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This is the sort of thing the US used to be able to do, and Britain back in its day:

China has built over 30,000 basic-level smart factories as part of a nationwide push to accelerate industrial digitalization and intelligent upgrading, according to the Ministry of Industry and Information Technology (MIIT).

The initiative, under the smart factory gradient cultivation action, has also seen the creation of 1,200 advanced-level and 230 excellence-level smart factories…

…The 230 excellence-level factories, distributed across all 31 provincial regions in China and covering over 80 percent of manufacturing sectors, have carried out nearly 2,000 advanced scenarios, including smart warehousing, AI-powered quality inspections, and digital research and development, said MIIT.

On average, these factories are 28.4 percent shorter in product development cycles, 22.3 percent higher in production efficiency, 50.2 percent lower in defect rates and 20.4 percent lower in carbon emissions, said the ministry.

Meanwhile, in South and Central America (a similar map could be done for Africa and chunks of Asia):

So, here’s the thing. Under the threat of Trump’s tariffs, Canada and the EU have been offering America to get tougher on China. “China’s the real enemy!” they scream.

Problem is, in the new Cold War, China’s going to be the stronger and more prosperous side. Russia, and most of Asia, Africa and South America are going to align with it. It will soon be in the “US after WWII” position of having more industry than everyone else combined, and it’s already leading in 80% of technological fields. It won’t be long before that’s 90% and I wouldn’t be surprised if in 15 years it’s damn near 100%.

Choosing to align with America is choosing to align with a declining Empire. It’s like laying your bet on Britain in 1918.

I don’t think this is a done deal for all of Europe. The old order is dying, new parties are challenging the old center-right and center-left parties and while the current leadership are lapdogs, the future leadership in many countries will not be. All China has to do is offer to not de-industrialize Europe, or all European countries have to do is cut a deal along those lines.

The sooner one makes the deal, the sooner one defects to the winning side, the better the deal will be.

It is my judgment that it won’t be long before the two best countries to live in are China and Russia. They are rising, and rising fast and the West is in decline. America’s strategy of cannibalizing its allies industries is stupid, because its allies industries are old legacy industries which are mostly already surpassed by China, and those that aren’t, like Pharma, soon will be.

There’s no reason to be loyal to America. Trump’s made it clear that the United States has no loyalty to anyone else, and it’s offering a really shitty deal. Russia doesn’t want to conquer Europe. They conquered half of it once before and it didn’t work out, they just want security.

This won’t happen this year, that’s clear, but smart nations will make the switch as soon as possible. I suspect the EU is likely to break up, so some European countries will change sides, and some won’t. But if it is done as a group of nations, even if not the whole bunch, the deal will be better.

The Cold War is already in its late early stages. I was writing about it as early as 2017, and it’s gathering steam. This is the new world. Choose your side, but for most countries, choose you must and wise statesmen choose the winning side.

 

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US/China Trade War Heats Up

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On December 5, 2024

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So, China has put export controls on rare earths.

People think “well, we’ll just mine them ourselves” but it often isn’t that simple. Gallium is refined as part of the process of aluminum smelting, for example, and the US has no aluminum smelting industry left.

More generally speaking the world is unfolding as I predicted: it’s splitting into two trade blocs, a cold war is developing (the Syrian “uprising” is a cold war maneuver) and the US is trying cannibalize its satrapies: that’s what Trump’s tariffs on allies are about.

Since the 50s it was deliberate American policy to offshore industry to its allies, especially South Korea, Japan and Taiwan, but also to Europe and the Anglosphere to some extent. Now it wants to pull that back in. This has been especially noticeable, of late, in Germany, where heavy industry is shutting down and much of it is moving to the US.

The problem, of course, is that China’s cost structure is lower and they are pulling ahead technologically. The Chinese believe in technology in a way the West hasn’t since the 60s—it’s good to them. They want more robots, more drones and more automation. They’re not scared of automation taking jobs, they associate rapid technological advancement with prosperity.

The problem with bringing industry back to the US isn’t just cost-structure, it’s the so-called competency crisis and the sparseness of the vast numbers of small industrial suppliers. The ecosystem which supports and allows rapid re-industrialization doesn’t exist in the West any more. A simple example is that almost all of the world’s machine tools and basic electronics which are needed to do everything else are produced in China (with a small machine tool industry barely surviving in Germany.)

The West is going to have increasing problems with resources, as well. Most of the “South” would rather do business with China, for reasons we’ve discussed ad-infinitum. As the US cannibalizes its allies it will also have difficulty with trade: if Europe’s poor and everyone else would rather buy Chinese, who are you going to sell to?

Trump’s tariff plans aren’t exactly stupid, but they require real industrial policy at the same time and managing relationships with trade partners, including partners the US insists on treating as enemies, and Trump isn’t up for that, any more than Biden was.

So America will decline, but will decline less fast than its allies, and the world will split into two competing blocs. Only this time the “Western” bloc will be the weaker, less technologically advanced one.

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