Americans are still not worried enough about the risk of world war

In which I try to be Gandalf instead of Cassandra.

Being the guy who’s always shouting about impending disaster is frustrating, thankless work. If nobody listens to you, and the disaster happens, you’re a useless Cassandra. If nobody listens to you and the disaster luckily doesn’t happen, you’re viewed as a fool. If people do listen to you and they take action to successfully avert the disaster, a lot of people will still say that your warning was wrong and the precautions were unnecessary. The only way you’ll ever come out looking smart is if the disaster does happen, and people heed your warning in time to mitigate its impact. At that point, you’re Gandalf. But the problem with being Gandalf is that it involves a disaster actually happening, so it’s not exactly something you should hope for.

Despite this, I think it’s our duty to warn the world of impending disaster if we think we see one coming.

I’ve been worried about a major war between the U.S. and China since the late 2010s, when tensions started ratcheting up in the South China Sea. I wrote a post for Bloomberg in 2018 saying that the risk of war was being ignored. I felt like I was shouting into the void.

Since the pandemic, and especially since the wars in Ukraine and Gaza erupted, those worries have gone mainstream. To give just one example, JP Morgan Chase CEO Jamie Dimon, probably the country’s most important banker, believes that the world is entering a period of geopolitical danger unrivaled since World War 2:

The nation's most influential banker, JPMorgan Chase CEO Jamie Dimon, told investors Monday that he continues to expect the U.S. economy to be resilient and grow this year. But he worries geopolitical events including the war in Ukraine and the Israel-Hamas war, as well as U.S. political polarization, might be creating an environment that "may very well be creating risks that could eclipse anything since World War II."

The comments came in an annual shareholder letter from Dimon…

"America's global leadership role is being challenged outside by other nations and inside by our polarized electorate," Dimon said. "We need to find ways to put aside our differences and work in partnership with other Western nations in the name of democracy. During this time of great crises, uniting to protect our essential freedoms, including free enterprise, is paramount."

He is, of course, completely right.

But while Dimon’s letter talks about the wars in Ukraine and Gaza, it leaves the big one unspoken: World War 3. If China and the U.S. go to war, it’ll make what’s happening now in East Europe and the Middle East look like child’s play — not just because the forces involved would be larger, but because the existing wars in East Europe and the Middle East would likely expand into regional wars as well.

You can bet that although he doesn’t talk about it, Dimon is thinking about WW3, as are many others. As I see it, the mere fact that not many people are talking about the danger represents evidence that we’re still not taking it seriously. And because Americans aren’t talking about it, our country doesn’t have the urgency required to do something about it. One of our great strengths as a nation has always been that we start shouting about problems before they become severe, giving us time to prepare. Right now we’re not shouting, so we’re not preparing.

So although I’m just an unimportant little economics blogger, I will do my best to shout about the likelihood of an onrushing catastrophe.

Let’s begin with a scary historical parallel.

When did World War 2 begin?

When Americans think of World War 2, we usually think of the roughly four years of the war that we participated in, from late 1941 through 1945. Those years were indeed the most climactic and destructive of the war, by far, but the war actually began earlier. In fact, although the official start date is September 1, 1939, it’s easy to make an argument that the war began long before that.

Some historians view WW1 and WW2 as one continuous war, but I don’t think that really makes sense — there was definitely a lull in global war deaths in the 1920s. On top of that, WW1 didn’t really have an East Asian theater. So let’s set that view aside.

But throughout the 1930s, there were a number of conflicts that led into World War 2, and eventually merged with that overall conflict, like tributaries emptying into a great river. Let’s do a quick timeline of these.

In 1931-32, Japan seized Manchuria from China, an act that led inexorably to a wider war between the two powers. The Manchurian war and occupation also set Japan on a path toward militarism, bringing to power the regime that would ultimately prosecute WW2 itself.

In 1935-36, fascist Italy invaded and conquered Ethiopia. The League of Nations halfheartedly tried to stop the war and failed, leading to the League being discredited and the post-WW1 order being greatly weakened. That emboldened the fascist powers. Ethiopian resistance to Italian rule would eventually become a minor theater of WW2.

From 1935 through 1939, Japan and the Soviet Union fought an undeclared border war, ultimately culminating in major battles in 1939, which the USSR won. That led to Japan seeking an alliance with Nazi Germany, and eventually led to the Soviets’ entry into the war against Japan at the very end of WW2. (The realization that Japan couldn’t defeat the Soviets and conquer Siberian oil fields also prompted Japan to try to take Southeast Asian oil instead, when it needed oil to prosecute its war against China; this led to Pearl Harbor and the Pacific War.)

From 1936 through 1939, Nazi Germany, fascist Italy, and the Soviet Union fought each other in a proxy war: the Spanish Civil War. Units from all three powers officially or unofficially engaged in the fighting. When the Nationalists won, it emboldened the fascist powers even further.

In 1937, Japan invaded the remainder of China, in what’s called the Second Sino-Japanese War. This became a major theater of World War 2, accounting for almost as many deaths as the Nazi invasion of the USSR. It also prompted Japan to go to war with Britain and the U.S., in order to seize the oil fields of Indonesia to support the invasion of China. (The fact that we don’t count this as the start of WW2 seems like pure eurocentrism to me.)

In 1939, before the Soviet Union joined World War 2, it invaded Finland in what’s known as the Winter War, seizing some territory at great cost. This war would continue all the way through WW2 itself.

So there were no fewer than six wars in the 1930s that ended up feeding into World War 2 itself! But even after the war officially began with Hitler’s invasion of Poland in September 1939, it was several years before the alliances settled into their final configuration and the fighting reached its peak.

Hitler’s invasion of Poland was actually a joint invasion with the Soviet Union! Even as the Nazis attacked from the west, the Soviets attacked from the east and seized part of Poland, having agreed with the Nazis beforehand to divide the country up. So at that point, until Hitler betrayed Stalin and attacked in 1941, the Nazis and the Soviets looked more like partners than enemies, despite just having fought a proxy war against each other in Spain.

Britain and France declared war on Germany after it invaded Poland, but for eight months, nothing really happened; this was called the Phoney War. That pause ended when Hitler invaded and conquered France and started bombing Britain in 1940. At that point WW2 was in full swing, but the violence was still fairly localized and fairly limited — only about two hundred thousand people died in those campaigns, which sounds like a lot but was only about 0.3% of the war’s total death toll.

It wasn’t until 1941 that World War 2 became what we Americans remember it as. It was then that the Nazis attacked the Soviets and Japan attacked the U.S., bringing the world’s two most powerful countries into the fray, raising casualties enormously, sealing the fate of the Axis, and creating the grand alliance that would form the basis of the postwar world order.

So if you were living at any point in 1931 through 1940, you would already be witnessing conflicts that would eventually turn into the bloodiest, most cataclysmic war that humanity has yet known — but you might not realize it. You would be standing in the foothills of the Second World War, but unless you were able to make far-sighted predictions, you wouldn’t know what horrors lurked in the near future.

In case the parallel isn’t blindingly obvious, we might be standing in the foothills of World War 3 right now. If WW3 happens, future bloggers might list the wars in Ukraine and Gaza in a timeline like the one I just gave.

Or we might not be in the foothills of WW3. I think there’s still a good chance that we can avert a wider, more cataclysmic war, and instead have a protracted standoff — Cold War 2 — instead. But I’m not going to lie — the outlook seems to be deteriorating. One big reason is that China appears to be ramping up its support for Russia.

China is now engaged in a proxy war against Europe

The Ukraine War is a proxy war. This is not because Ukraine is a U.S. or European “proxy”, in the sense that we tell the Ukrainians what to do. We do not. But the U.S. and Europe are contributing to Ukraine’s defense in order to keep Russia bogged down, because we all know that if Ukraine falls, the Baltics, Moldova, and eventually Poland are likely to be next on Putin’s menu.

In fact, although the U.S. has done a lot to help Ukraine, Europe as a whole has done even more:

Source: Ukraine Support Tracker

Expressed as a share of GDP, Europe has done even more, since Europe’s GDP is smaller than that of the U.S. And since the U.S.’ aid has been mostly military — which is basically the U.S. paying its own defense contractors — Europe’s aid has been more of an economic sacrifice.

On top of that, Europe, not the U.S., is bearing the brunt of the Russian gas cutoff. Ukraine’s fate is also much more important to Europe than to the U.S. Not only does Ukraine stand to join the EU if it survives, but if Ukraine falls, Putin will probably begin dismantling Europe. The U.S.’ lesser degree of direct interest in the outcome of the conflict is probably one reason why Ukraine aid is now bogged down in America even as Europe’s assistance ramps up.

So it makes sense to view the Ukraine War as a European proxy conflict against Russia. But what’s more ominous is that it also makes an increasing amount of sense to view it as a Chinese proxy conflict against Europe.

A little over a year ago, there were reports that China was sending lethal aid to Russia. Believing these reports, I concluded — perhaps prematurely — that China had gone “all in” on Russia’s military effort. Some of the reports were later walked back, but the fact is, it’s very hard to know how much China is doing to provide Russia with drones and such under the table. But now, a year later, there are multiple credible reports that China is ramping up aid in various forms.

For example, the U.S. is now claiming that China is providing Russia with both material aid and geospatial intelligence (i.e. telling Russia where Ukrainian units are so Russia can hit them):

The US is warning allies that China has stepped up its support for Russia, including by providing geospatial intelligence, to help Moscow in its war against Ukraine.

Amid signs of continued military integration between the two nations, China has provided Russia with satellite imagery for military purposes, as well as microelectronics and machine tools for tanks, according to people familiar with the matter.

China’s support also includes optics, propellants to be used in missiles and increased space cooperation, one of the people said.

President Joe Biden raised concerns with Xi Jinping during their call this week about China’s support for the Russian defense industrial base, including machine tools, optics, nitrocellulose, microelectronics, and turbojet engines, White House National Security Council spokesperson Adrienne Watson said.

This is very similar to the aid that Europe and the U.S. are providing Ukraine. We also provide geospatial intelligence, as well as materiel and production assistance. If reports are correct — and this time, they come from the U.S. government as well as from major news organizations — then China is now playing the same role for Russia that Europe and the U.S. have been playing for Ukraine.

In other words, the Ukraine War now looks like a proxy war between China and Europe. Jens Stoltenberg, the Secretary General of NATO, definitely thinks this is the case:

An “alliance of authoritarian powers” is working more closely together against Western democracies, the head of Nato has warned…Jens Stoltenberg told the BBC that Russia, Iran, China and North Korea are increasingly aligned…[Stoltenberg said that] the world was now “much more dangerous, much more unpredictable” and “much more violent”…He said there is an “authoritarian” alliance giving each other practical support that is “more and more aligned”…The Nato chief explained: “China is propping up the Russian war economy, delivering key parts to the defence industry, and in return, Moscow is mortgaging its future to Beijing.”

What does it mean that China is now engaged in a proxy war against Europe? Several things.

First, it means U.S. influence over the conflict is a lot more limited than we like to think. Americans like to believe that we’re still the hegemon we were in 1999 — that we can just stretch out our mighty hand to stop any war, and that wars therefore continue only when we want them to. This is complete fantasy. Even if America never sends another penny, Europe will continue to support Ukraine, because for them the conflict is existential (even if the Germans don’t quite realize it yet). In fact, Europe may eventually fight Russia directly — Emmanuel Macron is already talking about this openly.

And Vladimir Putin, emboldened by Chinese production and intelligence support, and having staked not only his legacy but his regime’s entire reason for existence on the conquest of territory in East Europe, will have little reason to stop fighting no matter what the U.S. says. The U.S. could push Ukraine to cede land for peace, and it probably wouldn’t matter, because Putin wants all of Ukraine, and then he wants other European countries too.

China, for its part, has mostly lobbed threats and bellicose rhetoric to Europe through its various propaganda proxies:

In other words, the Ukraine War is now a proxy war between major powers that is almost totally out of America’s control. That is a bad sign for global stability.

In fact, U.S. actions to try to deter China from backing Russia might just end up widening the conflict. Treasury Secretary Janet Yellen is threatening to put sanctions on Chinese banks:

The United States is prepared to sanction Chinese banks and companies, as well as Beijing’s leadership, if they assist Russia’s armed forces with the invasion of Ukraine, U.S. Treasury Secretary Janet Yellen said Monday…

China is “entitled” to have a relationship with Russia, she said, noting that much of the trade between the two countries is seen by the U.S. as nonproblematic. But the provision of military aid from Beijing to Moscow could trigger sanctions.

Of course, the election of Trump later this year could forestall that, since Trump has expressed conciliatory sentiments toward Russia and has made some recent signs of wanting to accommodate China as well. But if Trump’s America withdraws into isolationism — or worse, collapses into civil conflict — it will simply give a green light to the authoritarian powers to carry out more conquests, as the Axis was emboldened in the 1930s. The U.S. would eventually end up having to rush back in after the fact, like in WW2, or see itself relegated to the status of a fallen, friendless middle power.

Asia is a tinderbox

Of course, World War 3 will actually begin if and when the U.S. and China go to war. Almost everyone thinks this would happen if and when China attacks Taiwan, but in fact there are several other flashpoints that are just as scary and which many people seem to be overlooking.

First, there’s the South China Sea, where China has been pressing the Philippines to surrender its maritime territory with various “gray zone” bullying tactics. Ian Ellis has a good rundown of these:

Source: Ian Ellis

The U.S. is a formal treaty ally of the Philippines, and has vowed to honor its commitments and defend its ally against potential threats.

And then there’s the ever-present background threat of North Korea, which some experts believe is seriously considering re-starting the Korean War. That would trigger a U.S. defense of South Korea, which in turn might bring in China, as it did in the 1950s.

It’s also worth mentioning the China-India border. China has recently reiterated its claim to the Indian state of Arunachal Pradesh, calling it “South Tibet” and declaring that the area was part of China since ancient times. India has vigorously rejected this notion, of course. An India-China border war might not start World War 3, but the U.S. would definitely try to help India out against China, as we did in 2022.

So even as Europe and China become more deeply enmeshed in a proxy war, there are multiple flashpoints in Asia that could blossom into World War 3 any day now. Asia is an absolute tinderbox right now.

China is becoming better prepared for war. The U.S. is not.

A few Americans like Jamie Dimon are starting to wake up to all of this, but most Americans are not — they’re still focused on domestic conflict. As a result, America hasn’t mustered the urgency necessary to resuscitate its desiccated defense-industrial base. China is engaging in a massive military buildup while the U.S. is lagging behind. This is from a report from the Center for Strategic and International Studies:

The U.S. defense industrial base…lacks the capacity, responsiveness, flexibility, and surge capability to meet the U.S. military’s production needs as China ramps up defense industrial production. Unless there are urgent changes, the United States risks weakening deterrence and undermining its warfighting capabilities against China and other competitors. A significant part of the problem is that the U.S. defense ecosystem remains on a peacetime footing, despite a protracted war in Ukraine, an active war in the Middle East, and growing tensions in the Indo-Pacific in such areas as the Taiwan Strait and Korean Peninsula.

The United States faces several acute challenges.

First, the Chinese defense industrial base is increasingly on a wartime footing and, in some areas, outpacing the U.S. defense industrial base…Chinese defense companies…are producing a growing quantity and quality of land, maritime, air, space, and other capabilities. China…is heavily investing in munitions and acquiring high-end weapons systems and equipment five to six times faster than the United States…China is now the world’s largest shipbuilder and has a shipbuilding capacity that is roughly 230 times larger than the United States. One of China’s large shipyards, such as Jiangnan Shipyard, has more capacity than all U.S. shipyards combined, according to U.S. Navy estimates.

Second, the U.S. defense industrial base continues to face a range of production challenges, including a lack of urgency in revitalizing the defense industrial ecosystem…[T]here is still a shortfall of munitions and other weapons systems for a protracted war in such areas as the Indo-Pacific. Supply chain challenges also remain serious, and today’s workforce is inadequate to meet the demands of the defense industrial base.

“The Chinese defense industrial base is increasingly on a wartime footing.” If that isn’t a clear enough warning, I don’t know what would be. You have now been warned!

A whole lot of Americans need to be shouting these warnings to anyone who will listen. Instead, many Americans seem intent on covering up the problems out of embarrassment:

As the Navy’s largest U.S. trade show gets underway on Monday, officers in charge of the service’s marquee shipbuilding programs won’t offer the usual briefings with reporters and analysts about them…That break from the tradition…comes just days after the Navy announced that four of its most critical shipbuilding programs are years behind schedule…

The Navy’s top admiral and civilian secretary have still not responded to questions about a damning Navy report released Tuesday outlining the sweeping failure of the Navy and its industrial partners to make expected progress on two submarine programs, an aircraft carrier and a new class of frigates…

The delays, from one to three years each depending on the program, come as the Navy and Pentagon pour billions into modernizing and upgrading shipyards in an attempt to build and repair ships more quickly and keep pace with China. Beijing’s navy has already surpassed the U.S. in size.

But supply chain issues caused by Covid and the Navy’s insistence on changing the design of its ships even as workers build them have thrown the service’s plans into uncertainty.

Aware of the issues for years, the Navy is still unsure how to fix them…

Two people familiar with the issue say Navy leaders instructed the program managers not to hold their public briefings because the conference came too close to the release of the shipbuilding study[.]

I’m sure that to someone in the Navy’s public relations department thinks that simply refusing to talk to reporters about these problems means that the problems have been solved. This is typical of the ostrich-like mentality that I see among a very wide variety of Americans, from Congressional staffers to tech moguls to news reporters and pundits, regarding the imminent threat of war with China. But refusing to talk about problems doesn’t make them go away; it simply makes us less prepared to deal with them.

China’s leaders, meanwhile, labor under no such comforting illusions. In addition to their massive military buildup, they are taking various other actions that might or might not entail purposeful preparation for war, but definitely have the effect of making China better-prepared should a war break out.

For example, China’s dominance of the battery and electric vehicle industries helps insulates them against a potential blockade of their oil supplies through the Straits of Malacca.

Xi has also commanded the country to improve its food self-sufficiency; since the country was 94% self-sufficient in food back in 2000, this is probably not an impossible task. That will insulate China against any possible blockade of food imports in the event of a war.

As for finance, China has been stockpiling gold and urging trading partners to do more business in yuan. That should help neuter threats of financial sanctions, like the one Janet Yellen just issued.

Again, I don’t know which of these measures represent purposeful preparation before the launching of a great-power war. But they all definitely make China better-prepared. Even as the U.S. tries its best to ignore its glaring inability to build ships and missiles and ammunition, China is shoring up its key weaknesses in fuel, food, and finance.

All of this should scare you a bit. It certainly scares me a lot. The possibility that revisionist great powers will launch a world war in order to overturn the global order is now a lot higher than it was a few years ago, and arguably even higher than one year ago. Americans need to be screaming our heads off about this, so that we can start planning for this disaster today, instead of allowing ourselves to wait and be blindsided by it. We need to be warning our friends, and telling them to warn their friends. We need to be talking about this on national TV, in the New York Times, on podcasts, and on whatever social media the CCP still doesn’t control.

Right now, what I mostly hear is a deafening, horrible silence.

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