This podcast is brought to you by Business Radio, powered by Wharton. From the campus of the University of Pennsylvania Wharton School, this is Behind the Markets, on Business Radio, powered by the Wharton School, SiriusXM11. Welcome to Behind the Markets here in Business Radio, powered by the Wharton School. I'm your host, Jeremy Schwartz, Director of Research at Wisdom Tree and ETS sponsor, like co-hosts Wharton Finance Professor, Jeremy Segal, author of Stocks for the Long Run, and the Future for Investors. The professor is traveling this week with his family in Chile on a family vacation, so unfortunately it won't be with us today. Please note, I'm much of a representative of four-side fund services. The discussion today is not tied to the Office of Investment Products. Views are guests of their own, not those of us who are within Wisdom Tree or affiliates.
We've got a really special show for you today, and it's very, very timely. The politics is all the rage, talks between North Korea, South Korea taking place. There's the goal of easing tensions over there in Korea, and we've really got one of the foremost experts on both nuclear situations, missiles, as well as just generally the rise of the Asian superpowers, China versus the U.S., the goals, the tension that's creating.
Our guests for the first half of the show would be Graham Allison. He's a Douglas Dolan, professor of government at Harvard University of Kennedy School of Government. He's a leading analyst on all national security defense policies, and he also has a great new book that I've been talking about a lot with people on what is the most important issue for us over the next decade, China versus the U.S., destined for war. Can America and China escape through Citi's trap?
On the second part of the show, we're talking with Perth Tolle, who's the founder of Life and Liberty Indexes, and Perth has a background, have grown up in Beijing and in China, and it has a lot of experiences from her background there, and we're talking to her about the indexes she's created.
在节目的第二部分,我们将与Life and Liberty Indexes的创始人佩思·托尔进行交谈。佩思在北京和中国长大,拥有丰富的背景经历。我们将与她讨论她所创建的指数。
But for the first part of the show, Graham, welcome to our program. Thanks for joining us to talk about your book and your views and all of the research you've done.
Thank you so much for having me. So you have been involved in policy on the key issue of the day, so maybe we could sort of talk at a very high level, but maybe sort of talk about your personal experiences and where we get into a lot of the different dynamics of the current situation, but maybe we could talk what your reading of the situation is, you have this book, Destin for War, talk about maybe the high level U.S. versus China and what got you down this path of researching the book, Destin for War.
Well, it's a long story, but sure of it is, I've been a student of international security and American national security for all of my career. I've written a book on the Cuban Missile Crisis many years ago, but I've studied nuclear weapons. I was part of the old Cold War and the Soviet Union, but over the last dozen years of various of my former mentors, including Lee Kuanyu, who was the founder and builder of Singapore, and Henry Kissinger, who's my old professor, and then my colleague, you know, in the years since, kept saying, you should look more at China. You should look more at China. So the last dozen years I've been looking at the subject, and in the course of that came to the realization that what we're seeing in the rise of China and its impact on the U.S. is a version of a pattern that's really as old as history, as a pattern that was identified by the father and founder of history, fellow men, Thucydides. And he wrote about classical Greece and the occasion when the rise of Athens impacted Sparta and produced a catastrophic war.
So in this book I look at the last 500 years. I find 16 cases, one, six, in which a rising power threatens to displace a ruling power. Twelve of them in and more, four of them in and without war. So to say that war between a rising China and a ruling U.S. today is inevitable would be a mistake. That's not correct. But to say that the odds are not good would be right. And Thucydides reminded us in particular that in this dangerous dynamic between a rising power and a ruling power, the principal danger arises from third party actions, third party provocateurs in effect, who take an action not desired by either of the primary competitors, but to which one of the other feels compelled to respond, which then leads to a cycle of actions and reactions that in somewhere people don't want to go. And the great candidate for that today in the current scene is Kim Jong-un and what's happening on the Korean Peninsula.
Yeah, no, that was the obvious thought pattern of what you were developing there is that that sounds early like the situation we have today. And so through that lens of what's happening in North Korea, how much is that the biggest risk? We see that every day in the news with Trump and Kim Jong-un. Is that going to be, is that something you're worried about? And how do you see that playing out here?
Well, if Thucydides were, if we could consult Thucydides, he would say, this is the pattern that we've seen before. So in the case of Athens in Sparta, there was a quarrelsome ally of Sparta's component, which is the city state, and it got into a tangle with another party, Coursera, and then one thing led to the other and the two parties found themselves at war. One of the more chilling analogy is 1914. So there the assassination of an archduke, who didn't really matter at all, became the spark that produced a fire that burned down the hall of Europe, and at the end of which all of the great nations of Europe had been laid low.
So basically in the North Korean case today, we have with Kim Jong-un, almost, you know, if you were doing this in Hollywood, central casting couldn't do better for a provocateur, who is determined to have an ICBM that can deliver a nuclear weapon against San Francisco or Los Angeles. And now enter Donald Trump as his sort of competitor, who says, never is this going to happen on my watch. If the only way for me to prevent Kim Jong-un from completing the next set of ICBM tests and being able to attack San Francisco is for me to attack him, I'll do it.
But as we see these two trains sort of moving down a path to what will inevitably be a conclusion, sorry, a collision, we are now hoping that somehow against hope, Kim Jong-un can stop, we is now, and we cannot attack him, and we'll find some resolution. But I would say this is like the situation that one saw in 1914, and indeed like a pattern that one sees repeatedly in the book with the 16 cases.
So what do you think is Kim Jong-un's ultimate end goal through all these fighting with the US and sort of the provacitation is what's he looking for? What does he think he can sort of blackmail the US into? And then what do you see as China's reasons for sort of helping to defend essentially North Korea and a lot of this?
Well, two good questions. So I think basically Kim Jong-un's motives are clear enough. We keep trying to make them more obscure than they are. He wants to survive, and he wants his regime to survive, and he's noticed that there's a dangerous country called the US, which from time to time attacks countries like Saddam's Iraq or Gaddafi's Libya, and overturns the government and kills the leader. And he doesn't want to be one of those. And he thinks that if he has nuclear weapons that can threaten the US, that there's no way the US will attack him. And I would say as much as I despise that logic, I think it has a certain credibility.
On the other hand, we have a China, which doesn't care that much about Kim Jong-un and North Korea, even though it's been its traditional ally, but does care a lot about not having a unified Korea that's an American military ally on its border. So Korea abuts China in 1950 when the North Koreans provoked the war by attacking South Korea and the Americans came to the rescue as we marched north to unify the country, and what would have been a unified country, China entered the war, and most of the Americans that were killed in the Korean War, of whom there were about 50,000, and most of the Chinese were killed in that war, of which there were hundreds of thousands, and millions of Koreans were killed by Americans and Chinese fighting each other.
So, if it's hard to imagine that a little country like North Korea could take actions that at the end of the action-reaction cycle, you have two nations, the US and China, and more, we should look and look again at the first Korean War, and notice they already did this once before.
What about the other situation that's been brewing, the situation with Taiwan, and how that interaction with China? Is there any risk of Taiwan being also one of the cattle? I'm everybody talking about North Korea every day.
One of the chapters in the book is called From Here to War, and the purpose of the chapter is to say, here are five paths in which it's not required to stretch, just easy steps, when the current trajectory of events at the end of which you could have a war between the US and China, and Taiwan is a very good candidate, just as you said, so that's a good point.
So, basically, for anybody that watched what happened in October at the party Congress in which Xi Jinping, the leader of China, was not just reelected for another five years, but he was really coronated, like a 24-century emperor, with no successor in sight.
In that, he asserts clearly in the program that he outlined at the party Congress that China is not about to become a democracy, as Westerners think of it. It wants to be a party-led state in which the party dominates everything and in which citizens live within a party framework.
Well, in Taiwan, you now have 25 million people who have developed a democracy and who have a market economy and who live their lives the way they would like to do.
在台湾,现在有2500万人拥有发展成熟的民主制度和市场经济,他们可以过上自己想要的生活方式。
So, the formula that is the ambiguous umbrella that's managed to prevent this issue from coming to a head has been the fiction that both Taiwan and China subscribe to and we endorse, which is really there's one country and two systems.
It just happens they both disagree about which the country is. The Taiwanese think it's a country that would be in effect a reflection of Taiwan, and the Chinese think it's a China that will incorporate Taiwan.
So, there's no question, whatever, in anybody's mind, that if Taiwan would have tried to establish itself as an independent country, China will fight it and prevent that from happening. And if the US should be supporting Taiwan, then it would find itself in the world with US.
We're talking with Graham Allison, author of a book, Destin for War, basically the discussion of China versus US and the rise of China and how that's threatening the US in some ways and how this is through CitiD's trap, the example of 16 times in history, this led to this rising power versus the established country.
Graham, when you think about just China's rise, what's impressed you the most? You had a huge section in the book talking about just the huge growth rates of China and how it's come along to be really one of the already one of the leaders for the global economy.
Maybe talk about, were you talking about the sort of concept of the purchasing power of how much they can buy for their military, where their economy is on a PPP basis compared to just the general way we talk about them as a second largest economy in US dollars?
Talk about what's impressed you the most about China and where you see that economy going.
谈谈你对中国最印象深刻的地方以及你认为中国经济的发展方向。
I spend five days in China just coming back the day before Christmas, talking because everybody in China is very interested in the argument about CitiD's trap, since Xi Jinping talks about it a lot. Every time we go to China, you have to be blown away.
As I say in the book, I have a first chapter called The Rise of China. Most people in the US haven't been watching, but never before as a country risen so far, so fast, on so many different dimensions. I quote former Czech president, Bakhov Havel's good line says, things have happened so fast, we haven't yet had time to be astonished.
So one dramatic example I can see you looking at my office in Harvard right now is a bridge that goes across the river between the Kennedy School where my office is in the business school, across the Charles River.
That bridge has been under renovation for now 48 months, it's not yet over. It's three times over budget, it's been delayed four times. There's a bridge I drove across in Beijing last week called a Sunyun Bridge. It's got twice as many traffic lanes as the bridge, the Harvard Bridge.
They decided to renovate it the same way Harvard is doing in 2015. How long did it take for them to complete the project? Me interest 43 hours. So you can go to YouTube and actually put in a 43 hour China bridge and see the video speed it up of this project.
So everything from the airport to the roads, to the subways, to the ports, to the hotels, to the skyscrapers, to the behaviors of the companies. When you were seeing this, anybody who hasn't seen China in its face and in its space has either not been looking or they should wake up.
The US we talk about an infrastructure package that maybe Trump will get behind, but the infrastructure you talk about, how many high speed rail lines that they have in China being more than the rest of the world.
We have one high speed rail line that we've been building since 2010. It goes from San Francisco to Los Angeles, 500 miles. It was supposed to be done in 2017. They then said, no, how about 2029? And many people that will never happen.
If we had a high speed rail going from Boston to Washington, I could get on the train and go at 180 miles an hour and be in Washington in an hour and 40 minutes.
So just the whole conception is in the course that I give to people, I give a short version in the book. It says, when could China become number one? And I have 46 indicators, key indicators, but in the book I just give a dozen.
So the largest middle class, the biggest producer of smartphones, the fastest supercomputers, the largest national economy. And so students have to guess in the course they have to write down which year, 2030, 2040, not in my lifetime. Then I show them a second slide, which is already, all those things already happened.
Most people missed the fact that the big takeaway from the IMF World Bank meeting in 2014 was that China now has the largest economy in the world measured by what? Both the CIA and the IMF regard as the best single yardstick for measuring the size or comparing the economies, which is purchasing power parity. So if you're buying airplanes or drones or bridges or subways or airports or whatever, using the currency of China in China today, you can buy more stuff than you can buy in the US.
Yeah, you talk a lot about destined for war. There's obviously more than just military types of warfare. And one of the examples in the book you gave is they have the fastest supercomputer around cyber warfare is another hot topic of the day and also the protection for cyber security. Any sense of it, do you think the cyber warfare is a much higher chance to break out than sort of actually military shooting wars or the other topical political discussion is trade wars with Trump and is he going to become more protectionist and that may be sort of a catalyst for further work at any commentary on those two types of cyber war.
Cyber war is ongoing. That is, if you take it, if this includes cyber theft as I described in the book, in the Chinese theft of US electoral property is the greatest theft ever, theft ever in history. So basically, several trillion dollars worth of electoral property have been stolen. And in the Chinese mode of operation, you know, what we call R&D research and development, they call R-D-N-T. And the T stands for theft. So if I can steal the design for an F-35, the American advanced fighter, whether they invest in research and development, I start with a great advantage. And actually, if you look at the rollout of the Chinese version of the F-35, they're almost able to deploy the plane faster than we can. So basically, I can not only steal the stuff, but because I make things faster, I can produce them. So I would say you're seeing that across the spectrum.
网络战正在进行中。也就是说,如果你接受这个事实,如果这包括我在书中描述的网络盗窃,在中美选举财产盗窃中,是有史以来最大的盗窃。因此,价值数万亿美元的选举财产已被盗窃。而在中国的操作方式中,你知道,我们称之为研发(Research and Development),他们称之为R-D-N-T。而T代表的就是盗窃。所以,如果我能窃取F-35这种美国先进战斗机的设计,无论他们投资于研发与否,我都将占有巨大的优势。而事实上,如果你看看中国版F-35的发布情况,他们几乎能比我们更快地部署这款飞机。所以,基本上,我不仅能窃取东西,还因为生产速度快,我可以制造它们。所以我可以说,你可以在各个领域看到这种情况。
And now, in the economic realm, again, economic conflict or war is a vague term. Do we have an effect on ongoing competition between the US and China in the economic realm? Yes, we do. And are the terms of trade or the China one as mercantilists and protectionists on a national economy as it can get away with, yes, it does. And in fact, if you look at the program that Xi Jinping laid out at the 19th Party Congress, by 2025, so they set like a business, they set specific objectives on specific dates. By 2025, they mean to dominate 10 key industries that they identify, which include advanced information industries, including quantum computing, AI, and big data. By 2035, they mean to be the leader in innovation in every domain. And by 2049, they mean to be the global superpower, that the plan they lay out. Now, again, between here and there, there are lots of potential slips and a lot of obstacles, a lot of challenges. And that's what we say, well, okay, well, I don't really believe this is going to happen. I hope that's not going to happen. If you look at the performance of China in the 21st century, the slowest year of growth they had after the great financial crisis in 2027 and 8, the slowest year of growth was more than twice the fastest year of growth of the US economy. So basically, this is a, this is a, as I quote, Lee Kuan Yew in the book, he says, Americans are going to find this extremely difficult because China is destined to be the largest player in the history of the world. Four times as many Chinese as there are Americans. So if they're only one quarter as productive, they'll have an economy as big as ours. And why should they only be one quarter as productive? No, absolutely.
So, I mean, you, we can go on for a very long time with us. And I know we have you for a limited amount of time. Given the seriousness of these issues in terms of just, you're such an expert on the US Cuban Missile Crisis as well and the amount of times that we got perilously close to that nuclear war actually breaking out, but by accident, it didn't happen. What are, you know, you talked about there's 16 times that the city's trap occurred. 12 of them led to war. Four of them didn't. What are these four situations that you think, you know, the leaders were able to do that kept them away? Do you see any of those signs that were able to draw in lessons? Or do you think it's more like that 75% of the time? What should we learn from?
Well, I'm, I mean, the purpose of the book is to lay out a pretty stark diagnosis of the situation in order for us to recognize danger because if you know that you're going into a danger, or going into a dangerous domain, or terrain, then you should change and adapt your behavior. So extremely dangerous conditions require extreme imagination and extreme adaptability. Two cases of this, of the four success stories that I think often offer good lessons for us are first the lives of the US to challenge Britain at the beginning of the 20th century.
So as Germany was rising closer to home to challenge Britain in the decades before 1914, so to under Teddy Roosevelt was the US rising to become first dominant power in our atmosphere and then ultimately beyond. So in that case, the British were brilliant in adapting to a necessity. And in particular, in adapting, they distinguished between what they thought was vital for them on the one hand and what they thought was simply vested or the way things had been in the past on the other.
So vital to Britain was Canada as part of the Empire, which was crucial to Britain. So they, the son of the empire in which the sun never set was Canada, India and South Africa and Britain's other colonial holdings. So they were very concerned that the US not threatened Canada, but when Teddy Roosevelt threatened war over a territorial dispute in Venezuela, they thought, is that really something that we want to fight about? Are we that concerned? No, and so they adapted and they adjusted. And they did so so adroitly that when World War I eventually came because of the German British competition, the Americans immediately became the lifeline for Britain, first the supply line and the finance line and then ultimately the ally. So there's a lot of lessons there.
The second case is very instructive. The Cold War. So the Cold War is worth studying carefully. There you had a writing Soviet Union, which hardens it is to believe now, appeared to people in 1955 or 60 or 65 or 70 about to overtake the US. So they had a searching economy under their command and control system.
If you, as I say, it's so hard to believe that I quote in the book Paul Samuelson's economics introductory economics textbook, the 1964 edition in which he says, in the 70s, the Soviet Union's going to overtake the US economy. So in any case, in those conditions, rather than war, the US invented a strategy for so-called Cold War. There was a complicated strategy. It emerged over about four years of fits and starts, but it included containing the Soviet expansion, included deterring in the attacks upon us. And it included undermining the Soviet Union by basically encouraging the contradictions within the form of government that they had. And we persisted with that strategy for four decades until the point of victory.
So again, I think there's a lot of lessons to be drawn from that example, mainly of the extent of imagination and adaptability that was reflected in what ultimately became the Cold War strategy that was been followed by Democrats and Republicans alike over this, you know, four decades.
Well, we appreciate you spending time with us. I hope the government is listening to you and that you are advising them and taking your research in books seriously, thank you so much for joining the show. Again, Graham Allison is the author of a book, Destin for War, Can America and China Escape? The City's Trap. Professor Allison, thanks for joining us in the program today. Thank you so much for having me.
嗯,我们很感谢您与我们共度时光。我希望政府能倾听您的意见,并且您能认真借助书籍进行研究,非常感谢您参加这个节目。再次感谢作者格雷厄姆·艾里森(Graham Allison)的参与,他的书《注定开战:美国和中国能否摆脱陷阱》(Destin for War, Can America and China Escape? The City's Trap)非常值得一读。艾里森教授,感谢您今天参加我们的节目。非常感谢你能邀请我。