Here is the full transcript of Niall Ferguson’s discussion titled “Cold War II: The Emerging Conflict With China” at Hoover Institution.
TRANSCRIPT:
PETER ROBINSON: Just how serious is the emerging conflict with China? It has already turned into Cold War II. Historian Niall Ferguson on Uncommon Knowledge now.
Welcome to Uncommon Knowledge, I’m Peter Robinson. A fellow at the Hoover Institution, Niall Ferguson received his undergraduate and graduate degrees from Oxford. Before coming here to Stanford, he held posts at Oxford, Cambridge, New York University, Harvard, and the London School of Economics.
Dr. Ferguson is the author of more than a dozen major works of history, including The Pity of War: Explaining World War I, The Ascent of Money, Empire: How Britain Made the Modern World, and, we come now to today’s topic, Kissinger: The Idealist, the first volume of his two-volume biography of Henry Kissinger, one of the most important figures of the first long Cold War. Dr. Ferguson is now completing his second volume of the two-volume biography of Henry Kissinger. Completing it, yes, Neil?
NIALL FERGUSON: Yes, that’s the plan.
PETER ROBINSON:Got it. All right. Niall Ferguson in National Review. There was a first World War, then there was a second. They were not identical, but they were sufficiently similar for no one to argue about the nomenclature. Similarly, there was Cold War I, and now we are in Cold War II.
Is Cold War II worse than the first?
All right, here’s what I take the term Cold War to mean. The conflict with China will last two or three generations, generational conflict. We’ll find ourselves living under nuclear threat again, and the very existence of our civilization is at stake. Am I being melodramatic, or is that a fair summary of what Cold War is?
NIALL FERGUSON: Oh, it’s much worse than that, because you’re assuming that it’s going to be very protracted. Cold War I was really a four-decade affair. It ended, actually, rather sooner than most experts anticipated. But there’s no guarantee that Cold War II will last as long, because China is a far more formidable adversary than the Soviet Union was.
Economically, it has all but caught up. By one measure, gross domestic product based on purchasing power parity, China overtook the United States in 2014. The Soviets never got close. By that measure, their peak was 44% the size of the United States. So purely from an economic vantage point, Cold War II is worse.
From a technological vantage point, it’s also worse, because we have the nuclear weapons of Cold War I. Of course, we have superior weapons, the weapons they had at the beginning of Cold War I. But we also have a lot of things that they didn’t have in Cold War I, from artificial intelligence to maybe quantum computing. And so Cold War II is taking place with a great deal more technology, a great deal more firepower than Cold War I.
And do you want me to keep going?
PETER ROBINSON: Go ahead.
NIALL FERGUSON: There’s one more reason for being worried. Often the rest of the show trying to find a note of cheer. Well, let’s stare reality in the face. In Cold War I, it was really quite hard for the Soviets to find out things about the United States, because the number of Soviet citizens in the United States was pretty small throughout. And we knew who they were and where they were. There was some penetration of American institutions, but by comparison with Cold War II, it was nothing.
In Cold War II, you have massive social and economic interpenetration. There are all kinds of ways in which the Chinese can find out things about our relatively open access society and economy, and not just by being here, though they certainly are here in much larger numbers than the Soviets were, but also electronically. So I do think before we just assume, oh, Cold War II will be a bit like Cold War I in terms of duration, I don’t think that’s guaranteed. Nor is it guaranteed that we win, because of course we won Cold War I. We shouldn’t assume that we’ll win Cold War II.
PETER ROBINSON: All right. We’ll come back to this. Whose phrase is it? The correlation of forces.
NIALL FERGUSON: That was a Stalin phrase. It was certainly a Marxist-Leninist.
PETER ROBINSON: It’s actually a sensible analytical starting point. Their economy, our economy. You’ve just taken us through that. We’ll return to that.
NIALL FERGUSON: It’s a Marxist-Leninist concept that you can think of power in those terms. I mean, if Henry Kissinger were sitting here, he would say that there was always a moral dimension in addition to the material dimension. That’s one of the reasons why I call Volume I of that biography, the idealist. But it’s good that we’ve brought him up, because you don’t need to take it from me that we’re in Cold War II. Just ask Henry Kissinger, who at the age of 99 knows a thing or two about Cold Wars.
I’ll tell you a little anecdote, Peter. When I first started thinking about this in 2018, I had to summon up the courage to ask Kissinger, are we in a Cold War? And I asked him actually in China at a conference in late 2019. And he gave a great reply. He said, we are in the foothills of a Cold War. A year later, he upgraded that in 2020 to the mountain passes of a Cold War.
When I asked him about it last year, he said, almost taking it for granted that we’re in Cold War II, that the new Cold War would be worse, would be, to be precise, more dangerous than the first Cold War. So I’m not just winging this. I’m basing this partly on his insights.
PETER ROBINSON: I take you as an authority in your own right, Niall. But now, now, now, now, I’m truly staggered by this.
An event and a quotation. Here’s the event. Last month, the president of Taiwan visited the United States. No one in the Biden administration met her. But House Speaker Kevin McCarthy did. China responded with military exercises around Taiwan that included, and now I’m quoting from a Chinese release, quote, “nuclear-capable bombers armed with live missiles and warships staging drills to form an island-encompassing blockade situation,” close quote. I’m not sure what an island-encompassing blockade situation is, but it doesn’t sound good.
Here’s the quotation. You, in your regular column for Bloomberg News, this is a couple of years ago, losing or not even fighting for Taiwan would be seen all over Asia as the end of American predominance in the region. It would surely cause a run on the dollar and U.S. treasuries. It would be an American Suez. Suez, the 1957 British failure to keep the Egyptians from taking Suez, and that’s the moment when everybody, including the British themselves, realized Britain is no longer a global power.
Okay, correct. And Americans, why should we have so much at stake? Why should we be risking an American Suez with an island on the other side of the world?
NIALL FERGUSON: Well, it’s a great question because, going back to something you said a moment ago, we used to accept that Taiwan was part of China, and indeed we still officially do have a one-China policy. So one of the oddities about Taiwan is that it’s not really controversial that China claims it, and we do not recognize it as an independent state. In fact, you’ll get told off even for referring to it as a country in some circles. So what’s changed? Because for the better part of half a century, really since Henry Kissinger and Richard Nixon figured out the Shanghai communique with Mao Zedong and Zhou Enlai, we have gone along with the fiction that Taiwan is part of China.
We’ve had something called strategic ambiguity since the late 1970s, and that ambiguity was that people in Congress who weren’t so sure about what Kissinger and Nixon had done said, well, we have to have some commitment to Taiwan. And the commitment was an act of Congress that said, if China tried to change the status quo by force, we essentially reserve the right to take military action. But this is the ambiguity of our policy for 50 years.
We kind of accept the Chinese claim that Taiwan is part of China, but we also say that if they try to assert that claim by force, we may do something about it. What’s changed in the last few years is that Cold War II has begun, even if Americans don’t call it by that name. Increasingly, since around 2018, the United States, and this is true of both Republicans and Democrats, has taken a tougher stance on China generally, and on Taiwan specifically.
President Biden, on at least three, maybe four occasions, has seemed to repudiate strategic ambiguity. A number of leading policy intellectuals, Richard Haass, former Grand Panjandrum of the Council on Foreign Relations, said in 2020, “Why do we carry on with this strategic ambiguity nonsense? Let’s be unambiguous in our commitment to Taiwan.”
Nancy Pelosi, the former Speaker of the House, paid a visit to the island in which she acted, to all intents and purposes, as if Taiwan was an independent state she was visiting. So I think there’s been a significant shift in our general attitude towards China and our specific attitude towards Taiwan. And the Chinese, in turn, have been upping the ante. And you gave one example there, the recent blockade exercise, at the time of Speaker McCarthy’s meeting with the Taiwanese president, but they did something very similar when Nancy Pelosi was in Taiwan. So we are moving quite fast in the direction of a showdown over Taiwan after more or less half a century of strategic ambiguity.
PETER ROBINSON: So let me ask you this. Let me give you a couple of scenarios and see what you do with them. Here’s one. Here’s the example of Hong Kong. China just took Hong Kong. And here’s what we did about it. A couple of sharpish statements from President Biden and nothing else, nothing else. How did people in Hong Kong respond? Well, students demonstrated. The demonstrations are over. They’ve been suppressed.
And interestingly enough, to me at least, as best I can tell in the business community, exactly two Hong Kong people stood up against it. Jimmy Lai is in jail, and then Martin Li, if I have his first name correct, there was a prominent lawyer and businessman who also stood up against him. I’m not sure of his status, but you have this large Hong Kong community of very wealthy, almost overwhelmingly men, and they permit the deal to go forward.
Now we come to Taiwan. China is upping the ante. Surely they’re talking to each other. I think of another small country surrounded by hostile powers, Israel. Israel devotes more than 5% of its GDP to its defense. Taiwan, barely over 2%. There’s some sense in which it feels as though there’s a lack of seriousness, a willingness one way or another to do the deal. We in the business community here, we can get along. We can sort this out. What we’re interested in, after all, is commerce, and Beijing understands commerce these days.
So it happens one way or another by slow degrees, and we do nothing about it. Is that a Suez for us?
NIALL FERGUSON: It’s not the same as Hong Kong. Let’s just be clear about that.
PETER ROBINSON: Correct the whole analogy.
NIALL FERGUSON: Well, the status is completely different. As a former British colony, Hong Kong was not a democracy, never had democracy. And what’s happened is that Xi Jinping, the Chinese president, has simply expedited the takeover of Hong Kong, which was supposed to happen somewhat later this century. There’s no act of Congress that obliges the U.S. government to give a hoot about that. And that’s why it was always pretty much a very faint reflex action when Americans complained about what was happening in Hong Kong. Britain should have been complaining a lot louder because it was actually an agreement with Britain that the Chinese were violating.
Taiwan’s different. I mean, Taiwan has been a successful, vibrant democracy since the end of the military dictatorship there. It’s one of the most successful economies in the world. Part of its success is due to its being now the leading center for the production of the most sophisticated semiconductors. TSMC, the Taiwan Semiconductor Company set up by Morris Chang there, has become the world leader. And so economically, control of Taiwan matters a lot, much more than control of Hong Kong in terms of the global economy.
Now, the critical point to notice here is that Taiwan’s not Israel, nor is it Ukraine. You haven’t mentioned Ukraine, but we need to get to that because it is an important subplot in Cold War II. But just in the short run, think of the following sequence of events. There is an election coming up in Taiwan in January of next year. It is not at all clear who is going to win. The Chinese are already calling one of the candidates a pro-independence candidate. There is therefore a non-trivial scenario in which, in the course of that election, China interferes even more than it did in the election of 2020.
It was in Taiwan in January of 2020, and it was extremely striking to me how much the Chinese were trying to do to influence that election and how little they achieved. Why? Because the Taiwanese population over the years has moved steadily away from the mainland. Remember, at one point, a very large number of people had come there from the mainland. There were Chiang Kai-shek people who’d lost the Chinese civil war, lost the revolution in 1949, retreated to Taiwan. They still retained strong affinities with the mainland.
Well, time has passed. Today’s Taiwanese, particularly young Taiwanese, have no real affinity with the mainland, controlled as it is by the Chinese Communist Party. They have a lot of affinity with the very successful and vibrant democracy that they have come to enjoy there. And so I think a big problem from the vantage point of Beijing is that Taiwan is drifting away in ways that nobody in the 1970s foresaw. Many people in the 70s thought it would only be a matter of time before Taiwan was folded into the embrace of the mainland. That is not happening.
And the Chinese haven’t been able to devise any political way of stopping this divergence from happening. And I’ll say one final thing that is very important to understand. Xi Jinping has broken with convention by extending his time as president, as leader of the CCP and of the Chinese state. Why? His main argument for having that extension of term was Taiwan. Xi Jinping has said to those close to him, and it’s pretty clear from public statements too, that he regards bringing Taiwan under the control of the CCP as the keystone, capstone, the crowning achievement of his career, the reason that he’s staying in power for longer than his predecessors.
So it’s a very high-stakes issue for him. And we, of course, in turn, have made it a high-stakes issue for us. The more unambiguous we are about our commitment to Taiwan, the more of a problem that is for Xi Jinping.
PETER ROBINSON: So, I just gave you a scenario under which we could sort of diffuse it all and turn our heads and let it all go away. And you said, “No, no, no, no, no, Taiwan is not at all like Hong Kong.”
NIALL FERGUSON: But also, Peter, bear in mind that on polling, Americans now care about this issue way more than they used to. The Chicago Council did a poll in 2021 that showed that for the first time, more than half of Americans thought that if the Chinese moved against Taiwan, the U.S. should deploy its military in response, 52 percent.
PETER ROBINSON: Okay, so that brings us to this question of Xi Jinping is now beginning his third term of eight years. Have I got that right?
NIALL FERGUSON: Wait. No, that can’t be right.
PETER ROBINSON: He’s not term limited because he gets to do more or less whatever he wants to do.
NIALL FERGUSON: But there is an expectation five years. Five years. Five years, plus five years.
PETER ROBINSON: Okay. Single-digit number of years, however. Let me quote to you from this leaked memorandum, leaked last year. Air Force General Mike Minihan, “My gut tells me,” and this is to his own office, “this past, excuse me, it was this year in January, ‘my gut tells me we will fight in 2025. The United States presidential elections are in 2024 and will offer Chinese President Xi Jinping a distracted America. Taiwan’s presidential elections are in 2024 and will offer Xi Jinping a reason to attack.’ To which you add, he’s now in a single-digit third term. We’re now talking about one, two, three, four, five, six, or if Minihan is to be believed, two years or less. Do I feel that urgent to you?
NIALL FERGUSON: Yes.
Taiwan: An American Suez?
PETER ROBINSON: I’m still adjusting to the idea that we’re in the mountain passes of Cold War and now you’re saying, ‘Wait a moment, there could be, we have to make a decision whether to defend Taiwan in some small number of years.’
NIALL FERGUSON: Well, I think Cold War II is happening faster than Cold War I. Let me try and illustrate the point. When George Orwell first used the term Cold War in 1945, almost nobody got the point. Orwell’s extraordinary essay about the future in which there would be nuclear superpowers nailed it. He defined Cold War as a peace that is no peace and predicted that nuclear-armed superpowers, he said there would be three, the United States, the Soviet Union, and China. He said in this world, this of course is an anticipation of his great novel 1984, there would be this permanently armed peace that is no peace.
It took years for Americans to get the point. When Winston Churchill gave the famous Iron Curtain speech in Fulton, Missouri, the New York Times was highly critical of the speech and accused him of being a warmonger. Most Americans didn’t get it until North Korea invaded South Korea in 1950. And that’s the analogy I’d like to suggest to you with Ukraine.
The war in Ukraine is the first hot war of Cold War II. And just as the Korean War was the first hot war of Cold War I, it’s the moment of revelation in which people in the United States begin to see that this is serious. Remember, Putin would not have invaded Ukraine without a green light from Xi Jinping. He would not still be able to prosecute his war without the substantial economic support he gets from trade with China.
So I think we should imagine the Korean War, Ukraine War analogy, that gets us to the 1950s. That’s the sort of early 50s. And the war is going to play out pretty much like the Korean War did. A year of really serious fighting and back and forth and then attrition and it all gets bogged down and stalemate. And then eventually you start some kind of armistice process, you never actually get to peace. I could see all of that playing out.
But what we’re talking about with respect to Taiwan is the equivalent of the Cuban Missile Crisis, which happened, as you know, Peter, in 1962. I think we could get to 1962 a lot faster than they did in Cold War I and we’ll call it the Taiwan Semiconductor Crisis. And here’s the interesting thing about this crisis. I do not know if it happens next year, if it happens in 2025, if it doesn’t happen until 2028, but it is highly likely to happen this decade. The variables that are crucial here are the Chinese are not ready militarily to achieve a successful amphibious invasion. They would be taking immense risk if they did that now and I don’t think they will.
I think they’re in a position to blockade the island, but I’m not sure they’re ready for the consequences if we decide to run that blockade and take them on. So I think they’re not quite ready for prime time, but they cannot wait indefinitely. Why? Because to go back to our earlier discussion, every passing year gives the United States time to get Taiwan ready to defend itself. It’s not now, but we know that this is the issue and we have got a coherent strategy which we could execute to make Taiwan much harder to invade than it currently is.
And that’s why I think the timeframe is measurable in single digit years. It’s not something that Xi Jinping can say, “Oh, I’ll take care of it in 2030.” That is just not an option for him.
PETER ROBINSON: So I return, though, to you’re saying all kinds of fascinating things about the people of Taiwan. I understand that we consider Taiwan part of China. China obviously considers Taiwan part of China. But what you’re saying is that whatever this diplomatic, I won’t go so far as to call it a fiction, but this diplomatic form of words, even as we now know, as a result of the Russian invasion, Ukraine has become a real nation. It exists in people’s minds. They now think of themselves as Ukrainian in a way that may have been ambiguous before.
Taiwan has some kind of entity. I don’t know that the word to use is nation, but in the minds of the Taiwanese people, they are not Chinese. Question, then, why aren’t they spending more time and resources? Why aren’t they spending quite a lot more resource, making themselves harder to take on? This is the piece of the puzzle I cannot – President Tsai comes over here. She seems courageous. She insists on democracy, insists on free markets, takes that meeting with Kevin McCarthy knowing that it’s going to cause all kinds of mayhem back at home, and indeed it does.
And yet they only spend 2.1 percent of defense. The strategist Edwin Ludwig says apparently the Taiwan strategy is to let us defend them while their children play video games. I mean, this doesn’t fit.
NIALL FERGUSON: Well, it’s worked for Germany. I mean, think of all the countries that have been free riding on a U.S. security guarantee since Cold War I. I mean, this is not a bug. It’s a feature of Cold War that the United States is overwhelmingly the dominant supplier of security. And it’s only in a country like Israel that discovered the hard way that it couldn’t rely entirely on the United States in 1973 when the United States was, well, we’ll kind of help you, but first you have to negotiate.
I think for the Israelis, ’73 was the moment of truth when they realized that the U.S. might be an important part of their future security, but they’d have to be able to fend for themselves because Uncle Sam is not entirely reliable. Ukraine isn’t that different. I mean, Ukraine was not ready for primetime on the eve of the Russian invasion. It had to scramble and only barely survive the initial assault on Kyiv.
It surprised everybody by its ability to withstand that initial assault. But I think you have to –
PETER ROBINSON: Zelensky made the difference there, didn’t he?
NIALL FERGUSON: I don’t know if it was really old Zelensky. I think ordinary Ukrainians, I was in Kyiv late last year and I was very struck by the fact that wherever I went, ordinary people were wholly committed to resisting the Russian invasion. So we don’t know how Taiwan would respond to a blockade by China. We don’t know how the Taiwanese would respond to an attempted amphibious invasion.
Most people before February 22nd last year would have predicted that Ukraine would fold quite quickly. So I don’t think one should assume that Taiwan is somehow untypical. It’s actually behaving quite rationally as something, as a country that the U.S. has made a security commitment to. Having traveled in both Ukraine and Taiwan, I would say it’s hard to imagine the Taiwanese fighting as tenaciously and sustaining as heavy costs as the Ukrainians have in the past year. But there’s no doubt in my mind that they see themselves as on a road to independence.
And that’s something that is quite important, I think. There’s considerable unity, actually, when you look at Taiwanese polling about where the country’s future lies. Very, very few Taiwanese think it lies as being subjugated by the CCP.
PETER ROBINSON: So the Ukraine-Taiwan question here. There’s some commentators, our mutual friend Elbridge Colby perhaps is the most notable, who worries that Ukraine is a distraction. The United States has only so many resources, including mental resources. You ask the Pentagon to worry about Taiwan and Ukraine, and the Pentagon says, and they won’t say it formally, but they’ll say in effect, wait a minute, which is the real battle?
All right. So Ukraine is a distraction, possibly. And then others argue, our colleague here at the Hoover Institution, Stephen Kotkin, would argue that the defense of Taiwan runs through Ukraine. Which is it?
NIALL FERGUSON: Well, the thing about cold wars is that you don’t get to choose. You have, in fact, what I call the three-body-of-water problem, namely that you have to be ready to go to war or at least to deter your foes. In Europe, the North Atlantic, you have to be able to deter them also in the Pacific and East Asia. And let’s not forget the Persian Gulf.
And the U.S. doesn’t have the option to say, oh, I’m just going to pivot to Asia. Can you guys all just behave yourselves in Europe and the Middle East? Any more than it did in Cold War I. The problem about Cold War is it’s global. China can now play globally. It is now a player in the Middle East. So the U.S. doesn’t have the luxury of being able to choose. It has to be ready to contain Chinese expansion in all three at once. That’s my answer to this question. It’s not a choice.
Now, I think Elbridge Colby is right about one thing, and here he and I agree entirely. The more resources the United States puts into the Ukraine war, the more it runs down its stocks of javelins and stingers and HIMARS, the less it has available for any showdown in East Asia, because we don’t have the military industrial complex we used to have. That’s to say it takes a long time to replenish these stocks. There’s an extremely interesting report on empty bins that came out recently from one of the Washington think tanks pointing out that if there were to be a war over Taiwan now, we would run out of stuff very rapidly, particularly the precision missiles, which are such a crucial part of the American way of war today.
The problem about a war over Taiwan, Jim Stavridis makes this point very well in a book he wrote on the subject, is that it could get very big very fast. A limited war over Taiwan is a little hard to imagine, just as a limited war over Cuba was very hard to imagine. I want to try and suggest to you a very important part of my analogy. Remember, we said Cold War I and Cold War II are not exactly the same any more than World War I and World War II were exactly the same, but you didn’t really argue about there being world wars.
So in Cold War II, there’s a very important difference between the Cuban Missile Crisis and the Taiwan Semiconductor Crisis, and that is that in Cold War II, we are the Soviet Union. Because in Cold War II, it’s the communist power that gets to impose the blockade, because it was John F. Kennedy who blockaded Cuba. We called it a quarantine, but it was essentially a blockade. And it was the Soviets, it was Khrushchev, who had to send a naval force to Cuba. That was the most risky moment in the whole of Cold War I.
Only this time around, the Buddha’s on the other foot. It’s China that has the option to blockade Taiwan. We would then have to send a naval force to run that blockade. We would be in the Khrushchev situation. And that’s what makes me the most nervous about this. I mean, generally speaking, rerunning the Cuban Missile Crisis is a bad idea. It was the most dangerous moment, the nearest we came to World War III in the whole of the Cold War. And in many ways, it was just luck, sheer luck that it didn’t become World War III.
There was a Soviet submarine commander who gave the order to fire a nuclear torpedo at U.S. naval surface ships. It was only because, by chance, a superior officer was on the submarine and able to overrule him that that didn’t happen. If it had happened, we would have had Armageddon. Why would you want to rerun that game and expect the outcome always to be good? So we shouldn’t be running the Cuban Missile Crisis again. But we certainly shouldn’t be rerunning it when we get to play the Soviet Union.
Because remember what happened. In the end, Khrushchev had to back down. He took a deal with the Kennedy brothers, but it wasn’t public, and so it looked like he’d been humiliated. And it was pretty much curtains for his career at that point. But it was also a major setback for the Soviets. We don’t want to put ourselves in that position.
So my view is we have to follow through with the commitment we made to Ukraine. We are now in a position where we cannot afford for Ukraine to lose. Problem is, China can’t afford for Russia to lose. That’s why this war is going to keep going, because both superpowers are essentially now backing one of the dogs in the fight. While that carries on, we have got to come up with a good answer to the question, how do we deter China from invading or blockading Taiwan?
Because right now, what we’ve got is some good rhetoric and some very poor strategic options. The war games don’t always turn out very well. There was a recent one which strongly suggested it would go very badly for the United States. I think we’ve got a very short period of time to come up with a good answer to that question. If we don’t, then we run the risk of having our bluff cold. I mean, right now, we’re basically talking loudly and carrying a small stick when it comes to Taiwan, and everybody knows that that’s the wrong way around.
PETER ROBINSON: All right, step back from Taiwan, two or three, three big questions, each one of which we could devote an entire program to. I suppose so. I suppose I am saying that. What do they believe? A couple of quotations here. Guy Sorman in City Journal. ‘In what sense is the Communist Party of China still communist? It represents a Marxist liturgy that everyone recites and in which no one believes.’
Stephen Kotkin, seated right there on this program, quote, “We all thought they were cynics, that they just mouthed communist ideology, but some of them believe it. Not only do some of them believe it, but communism is inherent in the system.”
Okay, so even as during Cold War I, there’s this constant back and forth between no, no, no, it’s just another imperial power, this is another iteration of great power struggles, we know roughly what to expect of them. As against no, no, they’re communists. They have a fundamentally different view of the relation of man to government, of man to God, of one society to another, and their ultimate aim, do them the courtesy of taking them seriously. It’s in writing. They want communism to triumph throughout the world. We have the same back and forth today with China. What do they believe?
NIALL FERGUSON: Well, Professor Kotkin is always right. That’s rule one, and rule two is see rule one on this issue. Of course, he’s right, they are Marxist Leninists, to be precise. I think Xi Jinping in particular should be understood both seriously and literally as a Marxist Leninist. But again, I spent time in China prior to the pandemic, I was a visiting professor at Tsinghua, I remember having a meeting with the director of research at the Chinese Communist Party, he was really rather an important figure.
And he said in the course of that meeting, oh, by the way, the standing committee of the Politburo is rereading Marx and Engels, and so I think you should assume that there is an ideological peace to Cold War II. Many naïve people think that that is not the case because they pay a visit to Beijing or Shanghai and they see what appear to be business tycoons behaving much as business tycoons do. They see tower blocks, it looks familiar. But you really need to understand that behind this patina of capitalism, there is still a Communist Party in charge.
And if you look at what Xi Jinping says, not at Davos but in Beijing, or just look at other Communist Party propaganda, it’s very striking how ideological things have become. He has explicitly prohibited the teaching of democracy, rule of law, western ideas like that at Chinese universities. In the time I was at Tsinghua, there was a noticeable change in the atmosphere, it no longer became easy for me to talk in the classroom about the Cultural Revolution. So let’s lay to rest the idea that they’re just pretending to be communists, that it’s just the Chinese capitalist party, that’s nonsense.
And the ideological peace explains the belief that there is an inevitable collision coming with the imperialist west, which I think does underlie Chinese strategy. Xi Jinping, I think it’s pretty clear, has told the party and the country to prepare for war. I’ve done a fair amount of reading in the kind of policy intellectual space, the Chinese equivalents of me and Stephen Kotkin, they talk a lot about China’s role to displace the United States as the dominant empire.
So remember, Marxism-Leninism is an ideology of conflict, it’s an ideology with a historical determinist operating system, and that’s the reason to expect them to expect conflict.
PETER ROBINSON: Peter Thiel and his book Zero to One, we’re talking about a book that’s now a decade old, so I don’t even know whether Peter would restate this today. But here’s what he said in Zero to One, “The Chinese have been straightforwardly copying everything that has worked in the developed world, 19th century railroads, 20th century air conditioning, and even entire cities. They might skip a few steps along the way, going straight to wireless without installing landlines, for instance, but they’re copying all the same.”
Okay, this is an important point, because there is an argument that what we have, they outnumber us. You’ve just explained that by at least one measure, their economy is already bigger than ours. They outnumber us, if they choose to do so, they can outspend us on defense. Here’s what we have, democratic capitalism, which means the ability to innovate. We can stay a step ahead of them. That’s the strategic fallback that we have.
Emily Weinstein of the Brookings Institution, “Discussions surrounding China as a strategic competitor have been shaped by the notion that only democracy can promote innovation. Every day, China is disproving this line of thinking.”
NIALL FERGUSON: They’re a lot more innovative than the Soviets were, because they have a substantial part of their economy that is a market economy. There’s a reason why Chinese Internet companies are, after American Internet companies, the world’s biggest, and there are no European Internet companies worth talking about. That’s because the market operated when it came to developing the Internet, particularly commercializing it.
If one looks at the research that goes on in fields like artificial intelligence or quantum computing, it’s the US v. China. There are no other players in this race. They won’t even award a bronze medal. That’s one of the reasons it’s recognizably Cold War II, because there are two superpowers technologically. Now, I think the Chinese are still silver medalists. Look at vaccines. They utterly failed. Despite their boasts in 2020 that they would develop the vaccines against COVID, they didn’t. And we did. And that’s encouraging.
And I basically agree with your view that our system is likely to win the innovation race. But I have a couple of caveats. Number one, we have to mean it. What made Cold War I go well for the United States was that we understood we were in a technological race with a communist superpower that was determined to steal our technology and ultimately to bury us. When I started talking about Cold War II back in 2018, at the time when Huawei was the talk of the town, I elicited initially skeptical reactions. I can remember Eric Schmidt’s face when I first said this at a meeting in San Francisco.
I said to him, look, the reason I’m saying this is we have to understand that we’re in the Cold War or we will lose it. If we have open access research, if the AI labs at Google, or for that matter at Stanford, are freely accessible by CCP operatives, then we’re done. So one reason for talking about this is to make Americans realize that we are in a race and we can’t simply post it all online and not worry. We have to protect our intellectual property. They will steal it.
They have been stealing it because, as you said, that’s the communist way. Copy the technology and then paste it, whether it’s electric cars or, for that matter, giant online markets. I mean, what is Alibaba if not an Amazon knockoff at some level?
But there’s a second caveat. About half the billion-dollar unicorn companies created in this country since the mid-1990s were founded by, that’s right, immigrants. Elon Musk, not homegrown, and the list goes on. If we don’t keep the channel open for legal immigration of very talented, ambitious people, we will not win the technological race. That’s our superpower, importing talent and giving it capital. That’s the real magic of the United States. We can talk about democratic capitalism and all of the rest of it.
You know, the real secret sauce of the United States is magnet for talent. Here are the resources that you couldn’t get, Elon, in South Africa or Canada. Only here is it possible for you to build those dreams. The United States, and I blame both the Trump and the Biden administrations for this, has really screwed up its system of legal immigration. The Democrats seem to have decided that illegal immigration will do, and we’ve effectively opened our southern border. It’s the worst kind of immigration.
We need to get back to the system we had and which really served us well from the 1980s of being the country open to talent. If we don’t do that, then I think China has a decent chance. If we can get the talent flowing back into the United States, they’re done because nobody wants to immigrate to China. You just ask people all over the world, where would you like to go? It’s essentially the United States or the most developed European countries or the UK.
PETER ROBINSON: Okay, so that brings me to another one of these big thing questions. Francis Fukuyama writes The End of History after the end of the First Cold War, and he’s been misinterpreted all kinds of ways. But there is this notion that democratic capitalism is a natural endpoint. Once you get there, you’ve gotten to the best kind of society of which we know.
Alright, now the Chinese come along and they seem to have something. They seem to have a new model of some kind. They seem to have invented a way of combining authoritarian central control with at least enough free markets to lift hundreds of millions of people out of poverty to achieve world standing, which they did not have just 20 years ago.
So, in Cold War I, one of the dangers, one of the threats to us was that the Soviet system was intellectually attractive. There were communist fellow travelers throughout the United States. I don’t know, I’m trying to avoid McCarthyite terms, but they were appealing. China doesn’t seem to be appealing. Just as you said, nobody wants to immigrate to China, but then again we have the Third World. Saudi Arabia and Iran just did a deal together through China.
Do we have, China has wealth and it has brute power. Does it have intellectual appeal? Is it creating a new model that will be of real appeal to the Third World?
NIALL FERGUSON: Well, we don’t call it the Third World anymore.
PETER ROBINSON: We don’t. What do we call it?
NIALL FERGUSON: We call it the Global South. A term I rather abhor since hardly any people live in fact in the Southern Hemisphere, but you know what we mean. Look, there are two answers to that question. One, there are fellow travelers today. There are people who find the Chinese Communist Party system attractive. Many of them are former Marxists or current Marxists. Not all of them are. I mean, read Martin Jacques’ book “When China Rules the World” or read Daniel Bell’s recent writing on the Chinese system, which he openly admires.
So let’s not assume that there are no people attracted by the Chinese model. There weren’t that many people actually in the United States attracted by Soviet communism. You can see that from voting. It’s really quite a small number of people, even if some of them were in influential positions. So I don’t think the situation is that different, but the really critical point, the second point is the appeal of the Chinese model in Sub-Saharan Africa, in Latin America, in the Middle East, in Central Asia, indeed all over the so-called developing or emerging world.
If you are running a chaotic African country, which is poor economically, the Chinese offer you a solution to the crowd control problem, which is better than anything yet available prior to this time. You have surveillance technology, you have the AI, you have the cameras. You can nail down your civilian population, and the Chinese have a second thing to offer you, and that is infrastructure. You don’t have roads, we’ll do roads. You don’t have telecoms, we have Huawei.
If you look at a map of the world, according to Huawei, you can see where the Chinese appeal is strongest. It’s in the relatively poor parts of the world that need to have Huawei’s hardware, because it’s cheaper than any other hardware, and they need the financing that Huawei can offer them.
The reason I started talking about Cold War II was that I saw that map. The map of the world, according to Huawei, back in 2017 or 18, at a time when the U.S. was deciding to shut Huawei out, and some other countries were following our lead, like Australia. And I looked at the map of the world, and there were the countries that were saying no to Huawei. That was the U.S. and its close allies. There were the countries that were saying yes to Huawei, and that was what you called the third world.
And then there were the non-aligned countries that were like, can we maybe have a little bit of both? That’s a very Cold War map. As soon as you see it, you think, oh, man, this looks really familiar.
PETER ROBINSON: Okay. What difference does it make? Give me the world a decade from now, if on fast-forward, Cold War II ends, what would a Chinese – let me step back. We knew throughout Cold War I what life would look like if the other side won, because we only had to look to Eastern Europe. You only had to stand at the Berlin Wall in West Berlin and look over into East Berlin. You only had to look at North Korea versus South Korea.
It’s trickier to know what it would mean. Suppose they did win, what would a Chinese victory look like? How would life for your children – well, no, we’re talking about something happening so quickly that it’s not just our children, it’s us. How would life be different if they won? What’s at risk?
NIALL FERGUSON: Well, first of all, let’s remember that there are kind of three paths to think about. There’s the disastrous path, the World War III path, where we go head to head over Taiwan or somewhere else and things escalate, and before you know it, those nuclear weapons are flying. That is not to be dismissed out of hand. I think one of the big dangers about a U.S.-China war is that there would be no stopping it from escalating. So that’s a future we certainly want to avoid, just as we wanted to avoid it in Cold War I.
And there’s a second plausible scenario in which there’s a showdown and we fold. That’s my American Suez. That’s the moment when we suddenly discover, oh, the United States is not numero uno anymore. It can’t actually uphold its dominance in the Indo-Pacific region. And that is also something that would be undesirable.
PETER ROBINSON: By the way, after the British Suez, after the Suez Suez, life went on in Britain. Living standards continued to rise.
NIALL FERGUSON: Well, let’s not get carried away here, because there were significant prices to be paid for the end of empire. One of the most enjoyable features about being an American is that you are the issuer of the world’s reserve currency and the currency that is favored in almost all international transactions. And you can sell your 10-year treasuries to the rest of the world, and the rest of the world will buy them because they foolishly think it’s a risk-free asset. So if you lose at geopolitics, as Britain did in the late 1950s, it’s amazing how rapidly your currency can depreciate.
I mean, it’s not that long ago that it was $1.07 to the pound. That was during the Liz Truss fiasco. It was $4.86 when Britain’s empire was up and running, and that’s to be taken very seriously. The United States would find it expensive to be a second-tier power. The RMB is not a convertible currency, but as I just pointed out in the new piece for Bloomberg opinion, it is a currency that is being used more and more in transactions by China’s trading partners.
We should not underestimate how quickly the structure of the international financial system would change if the U.S. was no longer the credible number-one global superpower. But then there’s a broader question, which I think is what you’re really getting at, Peter. I mean, what’s the world like if China is number one? I think that’s not a very agreeable world to live in, because China’s attitude towards individual rights, human rights, is on display, and you don’t need to go to another planet.
You just need to go and see the way in which the Uyghurs are treated in Xinjiang, where there are labor camps, where perhaps a million people are under detention, there are reeducation programs, there are policies with respect to fertility that could easily be characterized and have been characterized as genocidal. So let’s not forget that at the heart of this system is the old totalitarian devil, the old dark force that we once understood so well in Cold War I, when we had to stare the Soviet system in the face and imagine what its extension would be like.
I’m not sure the expansion of Chinese power will be significantly different wherever it’s encountered resistance. If China’s in a position to export its model of social control and state surveillance to Africa, where almost all the population growth is going to be for the rest of this century, then a rising share of humanity finds itself under the great Beijing panopticon. So I think we need to regard the future, the world under Chinese dominance, with at least some of the fadour with which we used to regard a Soviet-dominated world. But can I come to my third scenario?
PETER ROBINSON: Of course.
NIALL FERGUSON: The third scenario, which I think is the plausible one, is that we find ourselves trying to prevent the expansion of Chinese power in multiple theaters. And payment is not the word we necessarily use because that was George Kennan’s word, but we’re already doing it. And it’s funny really to be engaged in a Cold War without acknowledging that.
But if you look at the Biden administration’s national security strategy that just came out, it says we’re not in a new Cold War, no new Cold War, but everything in it implies that we’re in a Cold War. What is the goal that they’re currently pursuing? To limit China’s ability to catch up with us technologically by cutting it off, that’s what the Commerce Department did last year, from the most sophisticated semiconductors and the people and technology you need to make them.
So we’ve kind of put the sanctions on China ex ante rather than waiting for a showdown. That’s a really important part of Cold War, the effort of the leading power to preserve its technological leadership by preventing the rising power from catching up. I think that’s the plausible future that we have to fight in multiple geographies. But above all, we have to fight to maintain our technological leadership. That’s the future I think we’re in.
PETER ROBINSON: Okay, last… I’m sorry, before we leave that, why don’t they call it a Cold War? I know why. I think of John Kennedy’s inaugural address, we will bear any burden, oppose any foe, and his ratings, it was in some ways, it was beyond bracing, it was thrilling to the country to feel that it was defending itself and liberty.
So why not? Why wouldn’t Biden go before Congress and say, “My fellow Americans, this is the moment”?
NIALL FERGUSON: Well, we will at some point get a president who does that, but we currently remember in that early phase of the Cold War when we don’t want to face it, and we think that if we call it by its real name, we’ll somehow make matters worse because we’ll upset Xi Jinping. And I think that sense that it would be rather undiplomatic to call it a Cold War in public is very widespread. You talk to people in the State Department or in the European, particularly in the European foreign ministries, and that’s what you’ll hear, “Oh, don’t call it that, Niall, you’ll really upset them.” And that’s classic early Cold War.
Remember how we used to worry about Uncle Joe in the period between 1945 and 1950, that sense that you got from the New York Times reaction to the Fulton Missouri because we’re in that state of mind. So the next president, I hope, will be able to speak more candidly about where we are, but there’s another reason. And the other reason is that this administration is much more interested in going after the enemy within, the MAGA Republicans whom they like to portray as the existential threats to America. They’d far rather focus on that for political reasons than focus on the threat posed by China.
I think that’s unfortunate because one of the lessons of Cold War I is our vulnerability is our capacity for internal division. Things went most wrong in the Cold War when the United States was most divided over Vietnam in that period from the late 60s to the early 70s when the country was really very, very deeply riven. That is not a problem they have in China. And that’s, I think, something to bear in mind.
PETER ROBINSON: So last question. Give me a moment to set this up and then I’ll just toss it to you, but I’ll need a moment to set it up. Here’s George Kennan. You mentioned George Kennan a moment ago. George Kennan writing in 1953. We’re not talking about the long telegram in 1946. This is 1953. The Cold War is now underway. Korea has already happened. George Kennan, “The thoughtful observer will find no cause for complaint in the Kremlin’s challenge to American society. He will rather experience,” nobody writes like this anymore, “he will rather experience a certain gratitude to providence which by providing the American people with this implacable challenge has made their entire security as a nation dependent on their pulling themselves together and accepting the responsibilities of moral and political leadership that history plainly intended them to bear.”
All right. You look back at the history of Cold War I and you can see at least a couple of moments when the United States really did pull itself together. One is when Kennan is writing. Truman has stopped the communists in Korea. We’ve invented NATO. On it goes. A moment of enormous diplomatic creativity and ramping up the military as well. And then again we pull ourselves together during the 1980s. Okay.
So the thought there is if we did it before we can do it again. One more quotation. This time from investor Ray Dalio who has billions of dollars at stake in China. And one tends to listen to a man who has something at stake. Ray Dalio, “The United States is having financial problems. It is having internal conflicts and it is facing outside challenges. The Chinese are earning more than they’re spending. They have domestic order and they’ve had rapid improvement in education, productivity, trade. I can’t say whether democracy is better than autocracy.” Rather breathtaking admission right there. “I can’t say whether democracy is better than autocracy. But China is not like the United States which is at risk of a type of civil war.” Close quote.
And the argument there is maybe we used to be able to pull ourselves together but that was a different America.
NIALL FERGUSON: Well before we bow down before our new Chinese overlords let me offer two thoughts about those two very different quotations from two very different men. First of all, Kennan was right. The Cold War, at least for a time, united Americans. It was something about which there was remarkably little dissent in the 1950s. And right through until the late 1960s there was a period of deep division as I mentioned already. And then to an amazing extent Americans came back together.
And even before the 1980s. One reason Ronald Reagan became president was that his critique of detente really struck home. I’m very, very struck by, as I read my way through the materials for Kissinger volume two, how quickly by 1976 Americans were convinced that detente had turned out to be a mistake. Over Angola for heaven’s sake. It was Soviet and Cuban intervention in Angola that caused Kissinger’s ratings to plummet. And Reagan too emerged as a national figure, a credible potential candidate for the Republican Party.
So one reason that I’m talking about Cold War II is that I do think this country needs an external foe. It really helps. If we don’t have one we just fall apart. We just tear one another to pieces. And it’s very interesting to see how in periods in the past hundred years when Americans haven’t had a clear geopolitical project, haven’t had a clear geopolitical rival, tends to be the period when the division gets nastiest. It was when we stopped believing in the Soviet threat and decided in the late 60s that we were really the problem. We were really the problem in Vietnam. That things became most toxic.
So maybe this is just the immigrant’s eye view, but I do think my fellow Americans, you do play better when there is a clear external threat. So let’s not underestimate how much that probably helps. Notice, bipartisanship is back on one issue and one issue alone. And that’s China. It’s a quite extraordinary thing that when you meet with members of Mike Gallagher’s new House Committee on the Chinese Communist Party, the Democrats and Republicans agree on a surprisingly large number of things. Not on everything.
But there’s a real bipartisan sense that China is the major strategic challenge. So if it’s polarization you worry about, I have good news for you. Because if you put against China in the title of your bill, it’ll get through the Senate and the House. That’s why we have to do immigration reform. As long as it’s against China, it can be done. So that’s my first response. We can definitely revive the Kennan spirit.
To Ray Dalio, I have this to say. China will lose Cold War II if we can play a long enough game because its demographics are a disaster. You know, it’s quite possible, Peter, that the population of China could half between now and the end of the century. It’ll certainly fall by at least a third. The fertility rate is well below replacement. And that’s a sign not of a healthy society, I think, but one that has a very foreshortened future.
Secondly, the economy is in deep trouble. Around 29% of Chinese economic activity is real estate. The whole thing sucks because tower blocks for nobody are not a good business proposition. Thirdly, I think there’s a major problem of legitimacy, which Xi Jinping understands, and that is precisely why they’re striking hawkish postures in Taiwan. It’s one of the few things they know they can really mobilize their population behind if growth is going down to the low single digits.
The key to Cold War, as you said earlier, is that the U.S. as a free society ought to out-innovate the totalitarian regime. So ultimately, the U.S. is the favorite to win a technological race. If we can avoid a reckless showdown when we’re not ready for prime time in the next few years. And this seems to be an argument actually for detente. Ronald Reagan made detente into a dirty word, but you know what? Detente served the United States pretty well after the debacle of Vietnam.
You couldn’t have been Ronald Reagan in 1970. You could only be Ronald Reagan in 1980. And what had happened in that decade? Actually, the U.S. had done a lot to recover from the disaster of Vietnam. I think we need to take our time right now.
PETER ROBINSON: Henry Kissinger bought a decade, and the decade we needed.
NIALL FERGUSON: Absolutely.
PETER ROBINSON: Is that correct?
NIALL FERGUSON: Absolutely. And that will be the key argument that volume two of my biography makes. That in that time, not only does the U.S. kind of get over the terrible trauma of Vietnam, it’s also the decade where Steve Jobs and Bill Gates invent little companies by the names of Apple and Microsoft. It’s when Silicon Valley really begins. And the U.S. starts in the 1970s to get its mojo back, even if it’s not until the 80s that it politically manifests itself.
And that’s because detente bought time. And I strongly believe we should be buying time right now and not racing for a showdown over an island that is a long way away from the United States and very close to China.
PETER ROBINSON: But that which we must somehow avoid surrendering at the same time.
NIALL FERGUSON: I think the lesson from the British experience is do try and deter your great power rival. Britain tried and failed twice to deter Germany from starting a world war. And I think the United States has to learn that lesson. It’s very tempting not to pay the upfront costs of deterrence. Defense budget is projected to shrink below the interest payments in the federal debt at some point later this decade on current fiscal projections.
When a superpower is spending more on debt service than defense, I think its days are numbered. You have to invest in deterrence. It’s cheaper than fighting a world war. That’s the lesson of British history. Americans need to learn it.
PETER ROBINSON: Niall Ferguson, thank you very much.
NIALL FERGUSON: Thank you Peter.
PETER ROBINSON: For Uncommon Knowledge, the Hoover Institution and Fox Nation, I’m Peter Robinson.
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