Chinese and American flags flying together
One of my long term predictions, coming true before our eyes, was that the world would fall into a new cold war, forming two trade blocs. I hoped it wouldn’t happen, I suggested ways to avoid it (including Europe forming the nucleus of a third bloc), but so far it appears correct.
Khrushchev famously said “we will bury you!” Looking back and knowing that the USSR and Warsaw Pact collapsed, we laugh.
But he had reason to believe it. Soviet style Communism had some issues, but in the 50s, it looked like the superior system. It had avoided the Great Depression, it had been the most powerful state in the coalition defeating the Nazis, it had by far and away a larger military than NATO and its economy was growing faster.
This last bit really worried the West. The miracle of compound growth, and all that. The Soviets weren’t just growing faster than the West, they had been doing so for a couple decades.
The West had strengths, including a larger population, a corner strategic position, a larger economy (even if growing slower) and the technological and scientific lead.
When the Soviets put a man into space first that scared the hell out of the West.
Now, of course, in the end they did “lose.”
Now take a look at the “Golden Billion”, NATO plus Japan and South Korea. Lower population. Weaker military (yes, it is.) Behind in 80% of techs. Slower economic growth. Smaller real economy (industrial/resources.) They still might be considered to have a corner position (though not once the Chinese unambiguously have the stronger navy, which they will), but it’s the only advantage they have.
The original Cold war started off with NATO leading in tech/population/economy/position, and behind it economic growth/military size.
This cold war starts with the “Golden Billion” ahead only in strategic position. (Continental US, Europe as a corner position.) Arguably even this isn’t true, given that South Korea and Japan are now key parts of the coalition and extremely vulnerable. As we speak, the US is slashing spending on research and tech, with only a few exceptions (like AI.)
No one, and I mean no one with least bit of historical understand or common sense would bet on the “Golden Billion”. If you are doing so you are stupid. Yes, there’s a small chance, but it is tiny.
The only sane and statesmanlike response from those in charge of American vassal states is to figure out how to switch sides, without the US wrecking them, and how to get a good deal. If you can’t, the question is how to avoid the US looting you during its decline. As Sean-Paul Kelley wrote on Sunday:
The chaos of rising energy prices is devastating European industry. In the last year alone Germany has lost 196,000 businesses. I repeat 196,000 businesses in Germany closed in one year. That’s devastating to any economy, but Germany long the economic engine of Europe and the EU is deindustrializing for one simple reason: the destruction of the Nord Stream pipeline, which has been an absolute catastrophe for Europe. The United States is responsible for it.
Russia and China just signed a new pipeline deal. The energy that went to Europe (the cheap energy) is now going to go to China. Chances of Europe avoid de-industrialization have gone from slim to damn near none.
The Soviets pumped resources to their allies. The Americans are cannibalizing them. The Soviets made a mistake, but this strategy won’t work either, because a fundamentally financialized economy cannot produce the type of real growth which is required to win a great power competition.
The world is dividing into two great blocs. One of them is so much weaker than the other, with so much worse future technological and economic growth prospects that it is almost certain to lose.
Our side.
The best way to win a war is to ally with the stronger side. That isn’t America or NATO or the Golden Billion.
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Troy
I see economists such as Krugman declaring we’re likely going to see stagflation. I think, how optimistic. There’s the creeping possibility of a deflationary spiral the longer things continue on as they are.
Feral Finster
If the golden billion cannot win a trade war, the alternative is simply to smash their opponents up, cut off shipping, cut off banking access, dangle out enticements to defecting members of the coalition.
cc
“The only sane and statesmanlike response from those in charge of American vassal states is to figure out how to switch sides, without the US wrecking them …”
Canada should ditch the F-35 rip-off scam with its de facto US “kill-switch” and the 100% tariffs on Chinese EVs that Canada adopted to back the US.
That would help our canola farmers who are paying the price for those 100% EV tariffs, and open up and important and growing market to Canadian exporters (as opposed to the shrinking protectionist market south of the border.)
Set up joint ventures for Chinese EV factories in Canada (ex. BYD, etc.) – like Mexico has – to create Canadians jobs, receive technology knowledge transfer, help the climate, and benefit Canadian consumers with affordable vehicles.
We, of course, need to also restore and reinforce Canadian sovereignty throughout our government and media to stop being manipulated and controlled by the US. Canada had been actively pursuing a trade deal with China in 2018 – in a sovereign attempt to diversify our trade and economic ties – before the US foreign-interfered to make sure to destroy that relationship and keep us completely dependent and vassalized.