From War to Tug-of-War: The Global Fight for Connectivity

Today's superpowers thrive on economic supply chains, not military might.

It wasn’t long after the collapse of the Soviet Union that American defense strategists had identified the new World War III scenario: Taiwan. Nearly a quarter century later, Taiwan remains on the tip of the geopolitical tongue. The election of the nationalist DPP in January has rattled cross-Strait relations. Beijing called on Taipei to abandon any “hallucinations” of independence. With tensions already flaring over the disputed South China Sea, this could be the beginning of the escalation spiral towards World War III many have feared for so long.

Taiwan isn’t the only World War III scenario experts have warned about in the past twenty-five years. India and Pakistan went nuclear in 1998, with the Kargil crisis ensuing a year later. Without a personal intervention by President Bill Clinton, many believe one or both of the South Asian rivals might indeed have pulled the trigger. More recently, China and Japan have come close to the brink several times, such as in 2010, when Japanese patrol boats rammed a Chinese trawler, and subsequently when the governor of Tokyo agreed to buy three of the disputed Senkaku Islands from their private owner, sparking enraged Chinese citizens to attack Japan’s embassy in Beijing. Prime Minister Shinzo Abe spent much of 2014 traveling from Davos to DC, warning the world that 1914 was playing out all over again. In 2015, Japan’s parliament lifted the country’s long-standing ban on overseas military operations, while the country weighs reviving its nuclear weapons program.

Every month also seems to bring some provocation by the pathologically erratic North Korean regime, whether a missile launch or maritime altercation. And then there’s Iran. Who can forget John McCain humming “bomb bomb bomb, bomb bomb Iran” in 2007? In mid-2015, he took to the Senate floor to all but advocate an Israeli preemptive strike on Iran’s nuclear facilities.

Which brings us to the present. Every world power is racing to do business in Iran. India and Pakistan are negotiating a Most Favored Nation trade agreement and gas pipeline from Iran. Toyota cars are selling in record numbers in China, and Chinese represent the largest number of foreigners living in Japan. And in November 2015, former Taiwanese president Ma Ying-jeou and Chinese president Xi Jinping held a historic meeting in Singapore to discuss peaceful reunification. They made it sound as inevitable as two decades of experts have made war sound.

Here is my prediction: Taiwan won’t cause World War III. Nor will Kashmir, nor the Senkaku Islands, nor the nonexistent Iranian nuclear bomb. We aren’t very good at predicting wars. The wars that have broken out in the recent past—the U.S. invasion of Afghanistan and Iraq after 9/11, Russia invading Ukraine, the proxy war under way in Syria—weren’t predicted by anyone.

Furthermore, applying ancient wisdom such as the “Thucydides trap” only gets us so far. In 2015, respected Harvard professor Graham Allison published a study covering five hundred years of geopolitical power transitions and found that war broke out between the “ruling” power and its “rising” challenger in twelve out of sixteen cases. Based on these historical odds, war between the United States and China is likely but not inevitable. The most important strategy to avoid sleepwalking into World War III, Allison’s brilliant paper urged, is a “long pause for reflection.” Let’s take that pause.

***

This isn’t 1914. In our haste to make analogies to a century ago, we have neglected the differences. European nations traded heavily across each other prior to World War I, but they did so as vertically integrated mercantile empires drawing on raw materials from their own vast colonies. They traded in finished goods without outsourcing production to each other. We did not have today’s internationally distributed manufacturing networks in 1914. The nineteenth and twentieth centuries brought trade interdependence; in the twenty-first century, we have complex supply chain dispersal as well—including among rival superpowers.

Even more than trade, it is investment that determines the stability of relations. Under a Cold War geopolitical paradigm, rivals wouldn’t invest in each other either; the United States and the Soviet Union certainly didn’t. But today’s robust flows of global investment among friends and enemies—“frenemies”—highlight how we have shifted from a Westphalian world to a supply-chain world. This financial and investment integration comes in the form of the trillions of dollars of assets invested in each other’s currencies and equities, as well as the tangible, productive capital—factories, real estate, banks, agriculture—they have bought and built inside other’s territory to efficiently and profitably access their markets.

Pages