All
Is Not Quiet on the Eastern Front
2022 was the year in which war made a comeback. But Cold War II
could become World War III in 2023 — with China as the arsenal of
autocracy.
World warriors?
Photographer: Greg Baker/AFP/Getty Images
By
January 1, 2023 at 5:00 AM GMT
Niall Ferguson is a
Bloomberg Opinion columnist. The Milbank Family Senior Fellow at the Hoover
Institution at Stanford University and the founder of Greenmantle, an advisory
firm, he is author, most recently, of “Doom: The Politics of
Catastrophe.” @nfergus
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War is hell on earth — and
if you doubt it, visit Ukraine or watch Edward Berger’s All Quiet on the Western Front, Netflix’s
gut-wrenching new adaptation of Erich Maria Remarque’s classic antiwar novel of
1929.
Even a small war is hellish
for those caught up in it, of course. But a world war is the worst thing we
humans have ever done to one another. In a memorable essay published last
month, Henry Kissinger reflected
on “How to Avoid Another World War.” In 1914, “The nations of Europe,
insufficiently familiar with how technology had enhanced their respective
military forces, proceeded to inflict unprecedented devastation on one
another.” Then, after two years of industrialized slaughter, “the principal
combatants in the West (Britain, France and Germany) began to explore prospects
for ending the carnage.” Even with US intermediation, the effort failed.
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Longer Unthinkable
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Strategic Retirement
Kissinger posed an
important question: “Does the world today find itself at a comparable turning
point [like the opportunity for peace in 1916] in Ukraine as winter imposes a
pause on large-scale military operations there?” This time last year, I predicted that Russia
would invade Ukraine. The question one year later is whether there is a way to
end this war, or whether it is destined to grow into something much larger.
As Kissinger rightly points
out, two nuclear-armed powers are currently contesting the fate of Ukraine. One
side, Russia, is directly engaged in conventional warfare. However, the US and
its allies are fighting indirectly by providing Ukraine with what Alex Karp,
chief executive of Palantir Technologies Inc., calls “the power of advanced
algorithmic warfare systems.” These are now so potent, he recently told the
Washington Post’s David Ignatius, that they
“equate to having tactical nuclear weapons against an adversary with only
conventional ones.” Take a moment to ponder the implications of that.
War is
back. Could world war also make a comeback? If so, it will affect all of our
lives. In the second interwar era (1991-2019), we lost sight of the role of war
in the global economy. Because the wars of that time were small (Bosnia,
Afghanistan, Iraq), we forgot that war is history’s favorite driver of
inflation, debt defaults — even famines. That is because large-scale war is
simultaneously destructive of productive capacity, disruptive of trade, and
destabilizing of fiscal and monetary policies.
But war
is as much about the mobilization of real resources as it is about finance and
money: Every great power needs to be able to feed its population and power its
industry. In times of high interdependence (globalization), a great power needs
to retain the option to revert to self-sufficiency in time of war. And
self-sufficiency makes things more expensive than relying on free trade and
comparative advantage.
Throughout
history, the principal source of power is technological superiority in
armaments, including intelligence and communications. A critical question is
therefore: What are the key inputs without which a state-of-the-art military is
unattainable?
In 1914,
they were coal, iron and the manufacturing capacity to mass-produce artillery
and shells, as well as steamships. In 1939, they were oil, steel, aluminum and
the manufacturing capacity to mass-produce artillery, ships, submarines, planes
and tanks. After 1945 it was all of the above, plus the scientific and
technical capacity to produce nuclear weapons.
Today,
the vital inputs are the capacity to mass-produce high-performance
semiconductors, satellites, and the algorithmic warfare systems that depend on
them.
What were
the principal lessons of the 20th-century world wars? First, the American
combination of technological and financial leadership, plus abundant natural
resources, was impossible to beat. Secondly, however, the dominant Anglophone
empires were poor at deterrence. The UK failed twice to dissuade Germany and
its allies from gambling on world war. This was mainly because Liberal and
Conservative governments alike were unwilling to ask voters for peacetime
sacrifices, and they failed at statecraft. The result was two very expensive
conflicts that cost much more in life and treasure than effective deterrence
would have — and left the UK exhausted and unable to sustain its empire.
The US
has been the dominant Anglophone empire since the Suez Crisis of 1956. With the
threat of nuclear Armageddon, the US successfully deterred the Soviet Union
from advancing its Marxist-Leninist empire in Europe much beyond the rivers
Elbe and Danube. But America was relatively unsuccessful at preventing the
spread of communism by Soviet-backed organizations and regimes in what was then
known as the Third World.
The US is
still bad at deterrence. Last year, it failed to deter President Vladimir Putin
from invading Ukraine, mainly because it had low confidence in the Ukrainian
defense forces it had trained and the Kyiv government that controlled them. The
latest objective of American deterrence is Taiwan, a functionally autonomous
democracy that China claims as its own.
In October, President Joe
Biden’s administration belatedly published its National Security Strategy.
Such documents are always the work of a committee, but internal dissonance
shouldn’t be this obvious. “The post-Cold War era is definitively over,” the
authors declare, “and a competition is underway between the major powers to
shape what comes next.” However, “we do not seek conflict or a new Cold War.”
For the major powers have “shared challenges” such as climate change and Covid
and other pandemic diseases.
On the
other hand, “Russia poses an immediate threat to the free and open
international system, recklessly flouting the basic laws of the international
order today, as its brutal war of aggression against Ukraine has shown.”
China, meanwhile, is “the only competitor with both the intent to reshape
the international order and, increasingly, the economic, diplomatic,
military and technological power to advance that objective.”
So what
will the US do to check these rivals? The answer sounds remarkably similar to
what it did in Cold War I:
·
“We will assemble the strongest possible coalitions to advance and
defend a world that is free, open, prosperous and secure.”
·
“We will prioritize maintaining an enduring competitive edge over
the PRC while constraining a still profoundly dangerous Russia.”
·
“We must ensure strategic competitors cannot exploit foundational
American and allied technologies, know-how, or data to undermine American and
allied security.”
In other
words: form and maintain alliances and try to prevent the other side from
catching up technologically. This is a cold war strategy in all but name.
US support for Ukraine
since the Feb. 24 invasion has undoubtedly succeeded in weakening Putin’s
regime. The Russian military has suffered disastrous losses of trained manpower
and equipment. The Russian economy may not have contracted by as much as
Washington hoped (a mere 3.4% last year, according to the International Monetary Fund),
but Russian imports have crashed due to Western export controls. As Russia’s
stock of imported component parts and machinery runs down, Russian industry
will face deep disruptions, including in the defense and energy sectors.
Last
year, Russia cut off gas exports to Europe that it cannot reroute, as there are
no alternative pipelines. Putin thought the gas weapon would allow him to
divide the West. So far, it has not worked. Russia also tried choking Black Sea
grain exports. But that lever had little strategic value as the biggest losers
of the blockade were poor African and Middle Eastern countries.
The net
result of Putin’s war thus far has been to reduce Russia to something like an
economic appendage of China, its biggest trading partner. And Western sanctions
mean that what Russia exports to China is sold at a discount.
There are
two obvious problems with US strategy, however. The first is that if
algorithmic weapons systems are the equivalent of tactical nuclear weapons,
Putin may eventually be driven to using the latter, as he clearly lacks the
former. The second is that the Biden administration appears to have delegated
to Kyiv the timing of any peace negotiations — and the preconditions the
Ukrainians demand are manifestly unacceptable in Moscow.
The war
therefore seems destined, like the Korean War in Cold War I, to drag on until a
stalemate is reached, Putin dies and an armistice is agreed that draws a new
border between Ukraine and Russia. The problem with protracted wars is that the
US and European publics tend to get sick of them well before the enemy does.
China is a much tougher nut
to crack than Russia. Whereas a proxy war is driving Russia’s economy and
military back into the 1990s, the preferred approach to China is to stunt its
technological growth, particularly with respect to — in the words of National
Security Adviser Jake Sullivan —
“computing-related technologies, including microelectronics, quantum
information systems and artificial intelligence” and “biotechnologies and biomanufacturing.”
“On
export controls,” Sullivan went on, “we have to revisit the longstanding
premise of maintaining ‘relative’ advantages over competitors in certain key
technologies. We previously maintained a ‘sliding scale’ approach that
said we need to stay only a couple of generations ahead. That is not the
strategic environment we are in today. Given the foundational nature of
certain technologies, such as advanced logic and memory chips, we must maintain
as large of a lead as possible.”
Sanctions
on Russia, argued Sullivan, had “demonstrated that technology export controls
can be more than just a preventative tool.” They can be “a new strategic asset
in the US and allied toolkit.” Meanwhile, the US is going to ramp up its
investment in home-produced semiconductors and related hardware.
The
experience of Cold War I confirms that such methods can work. Export controls
were part of the reason the Soviet economy could not keep pace with the US in
information technology. The question is whether this approach can work against
China, which is as much the workshop of the world today as America was in the
20th century, with a far broader and deeper industrial economy than the Soviet
Union ever achieved.
Readers of the
science-fiction novel The
Three-Body Problem by Liu Cixin will recall that the aliens
from the planet Trisolaris use intergalactic surveillance to halt technological
advance on Earth while their invasion force makes its way through deep space.
Can arresting China’s development really be how the US prevails in Cold War II?
True, recent Commerce
Department restrictions — on the
transfer of advanced graphics processing units to China, the use of American
chips and expertise in Chinese supercomputers, and the export to China of
chipmaking technology — pose major problems for Beijing. They essentially cut
the People’s Republic off from all high-end semiconductor chips, including
those made in Taiwan and Korea, as well as all chip experts who are “US
persons,” which includes green-card holders as well as citizens.
It’s also
true that there are no quick fixes for Chinese President Xi Jinping. Most of
China’s fabrication capacity is at low-tech nodes (larger in size than 16
nanometers). He cannot conjure up overnight a mainland clone of Taiwan
Semiconductor Manufacturing Co., which leads the world in the
sophistication of its chips. Nor can Xi expect that TSMC would conduct business
as usual if China launched a successful invasion of Taiwan. The company’s chip
fabs would almost certainly be destroyed in a war. Even if they survived, they
could not function without TSMC personnel, who might flee, and equipment from
the US, Japan and Europe, which would cease to be available.
Yet China
has other cards it can play. It is dominant in the processing of minerals that
are vital to the modern economy, including copper, nickel, cobalt and lithium.
In particular, China controls over 70% of rare earth production both in terms
of extraction and processing. These are 17 minerals used to make components in
devices such as smartphones, electric vehicles, solar panels and
semiconductors. An embargo on their export to the US might not be a lethal
blow, but it would force the US and its allies to develop other sources in a
hurry.
America’s
Achilles heel is often seen as its unsustainable fiscal path. At some point in
the coming decade, according to the Congressional Budget Office, interest payments
on the federal debt are likely to exceed defense spending. Meanwhile, it is not
immediately obvious who buys all the additional Treasuries issued each year if
the Federal Reserve is engaged in quantitative tightening.
Might
this give China an opportunity to exert financial pressure on the US? In July,
it held $970 billion worth of Treasuries, making it the second-largest foreign
holder of US debt. As has often been pointed out, if China chose to dump its
Treasuries, it would drive up US bond yields and bring down the dollar, though
not without causing considerable pain to itself.
Yet the bigger American
vulnerability may be in the realm of resources rather than finance. The US long
ago ceased to be a manufacturing economy. It has become a great importer from
the rest of the world. As Matthew Suarez, a
lieutenant in the US Marine Corps, points out in an insightful essay at
American Purpose, that makes the nation heavily reliant on the world’s merchant
marine. “Setting aside the movement of oil and bulk commodities,” Suarez
writes, “most internationally traded goods travel in one of six million
containers transported in approximately 61,000 ships. This flow of goods
depends on an equally robust parallel flow of digital information.”
The
growing dominance of China in both these areas should not be underestimated.
Beijing’s Belt and Road Initiative has created infrastructure that reduces
Chinese reliance on seaborne trade. Meanwhile, Shanghai Westwell Lab
Information Technology Co. is rapidly becoming the leading vendor of the most
advanced port-operating systems.
The war
in Ukraine has provided a reminder that the disruption of trade is a vital
weapon of war. It has also reminded us that a great power must be in a position
to mass-produce modern weaponry, with or without access to imports. Both sides
in the war have consumed staggering quantities of shells and missiles as well
as armored vehicles and drones. The big question raised by any Chinese-American
conflict is how long the US could sustain it.
As my Hoover Institution
colleague Jackie Schneider has
pointed out, just “four months of support to Ukraine … depleted much of the
stockpile of such weapons, including a third of the US Javelin arsenal and a
quarter of US Stingers.” According to the Royal United Services Institute,
the artillery ammunition that the US currently produces in a year would have
sufficed for only 10 days to two weeks of combat in Ukraine in the early phase
of the war.
A February 2022 Department
of Defense report on industrial capacity warned that the US
companies producing tactical missiles, fixed-wing aircraft and satellites had
reduced their output by more than half.
As I have pointed out elsewhere, the US today is
in some ways in the situation of the British Empire in the 1930s. If it repeats
the mistakes successive UK governments made in that decade, a fiscally
overstretched America will fail to deter a nascent Axis-like combination of
Russia, Iran and China from risking simultaneous conflict in three theaters:
Eastern Europe, the Middle East and the Far East. The difference is that there
will be no sympathetic industrial power to serve as the “arsenal of democracy”
— a phrase used by President Franklin D. Roosevelt in a radio broadcast on
Dec. 29, 1940. This time it is the autocracies that have the arsenal.
The Biden
administration must be exceedingly careful not to pursue economic warfare
against China so aggressively that Beijing finds itself in the position of
Japan in 1941, with no better option than to strike early and hope for military
success. This would be very dangerous indeed, as China’s position today is much
stronger than Japan’s was then.
Kissinger
is right to worry about the perils of a world war. The first and second world
wars were each preceded by smaller conflicts: the Balkan Wars of 1912 and 1913,
the Italian invasion of Abyssinia (1936), the Spanish Civil War (1936-39), the
Sino-Japanese War (1937). The Russian invasion of Ukraine may seem to be going
well for the West right now. But in a worst-case scenario, it could be a
similar harbinger of a much wider war.
More From This Writer at
Bloomberg Opinion:
·
The Four Mysteries of
Pelosi’s Troublesome Taiwan Trip: Niall Ferguson
·
The World’s Cascade of Disasters Is
Not a Coincidence: Niall Ferguson
·
The Fed Hasn’t Fixed Its Worst
Blunder Since the 1970s: Niall Ferguson
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