What to do with China: Part I

Graham Allison published a controversial book in 2017 in which he argued that the probability for a major war increases when an established hegemon faces an emerging power that threatens the hegemon’s position. He used Thucydides, the Greek historian who wrote a history of the war between Sparta and Athens, as his model for superpower competition.1

Over the past few years, we have noted steady changes in American views toward China, and vice versa, that will likely lead to superpower competition and the potential for conflict. In Part I of this report, we will discuss the American and Chinese viewpoints. In Part II, we will summarize the two positions and examine the potential for war using the historical examples of British policy toward the U.S. and Germany, offering our take on which analogy best fits. There will be a discussion of current American views on hegemony as well. As always, we will conclude with market ramifications.

The American View

During the period of active American hegemony, the U.S. has faced only one serious competitor, the Soviet Union. When the Berlin Wall fell and the Soviet Union eventually collapsed, American foreign policy leadership tended to view this outcome as the victory of a superior system over the doomed totalitarian system of communism. After all, one of the primary architects of the Cold War, George Kennan, argued that the U.S. could outlast the Soviets because democracy and capitalism were superior.2 This position was reiterated by Francis Fukuyama in his argument that the fall of communism proved, once and for all, that the culmination of government and policy was capitalism and democracy, and that there was no other alternative available.3

When studying history it is important to understand how mankind has progressed and adapted to conditions over the years. However, it is not a science. Proving something using the scientific method requires the ability to create experiments and apply controls to prove that one thing causes another. In history, and in many of the social sciences, experimentation is impossible. Something happens—a war, market crash, epidemic, etc.—and we search for conditions that preceded the event and actions taken during the event to determine lessons. History and social sciences that try to examine human events that progress through time are vulnerable to the post hoc ergo propter hoc4 fallacy. Just because some event preceded an outcome doesn’t necessarily prove that it caused the specific outcome.