Rumors of War

What happens when an irresistible force meets an immovable object?

Map: US Army. Source: Wikipedia

That’s an old philosophical question. The answer, of course, is that no force is really irresistible and no object is truly immovable. But when they seem that way, spectacular conflict can be the result.

That was the case during the 5th century BC in Greece. Sparta had been the dominant power in Greece. They had a militant, military culture built around their army. Athens was a rising power. It had a commercial culture and a powerful navy. What made war between the two city-states inevitable, according to the ancient Greek historian Thucydides, was the growth of Athenian power and the fear which this caused in Sparta. The immovable object was Sparta. The irresistible force was Athens. The Peloponnesian War was the result.

The Thucydides Trap is a conundrum that’s been studied by the historian Graham Allison. He found 16 instances of a dominant nation threatened by the rise of a growing power. Twelve of those sixteen cases ended in war – the most destructive of which was the rising industrial power of Germany challenging the British Empire in the early 20th century. That did not end well.

Today, the rising power is China. The dominant nation is the US. After the Cold War, the US was left as the world’s sole remaining superpower. Western political and economic institutions became so dominant that Francis Fukuyama declared that liberal democratic capitalism was the “end of history” – that there was no comparable, coherent system.

But the rise China threatens this Pax Americana. They have a fast-growing economy, a rising middle class, and the desire to be taken seriously on the global stage. They are now the world’s largest producer of ships, steel, aluminum, autos, cell phones, and computers. Baidu rivals Google as the world’s largest search engine. Alibaba rivals Amazon as the world’s largest online marketplace. Conflicts at sea, in space, in cyber-space, and in trade are all possible, and need careful, cautious management.

War doesn’t always happen when a rising power displaces an established power. The UK took the long view in the 1890s when President Cleveland accused the Salisbury government of establishing a new colony in Venezuela, violating our Monroe Doctrine. Britain backed down, and agreed to go to arbitration rather than war. Our special relationship with England has been the result.

Public Domain. Source: Wikipedia

War isn’t inevitable, but war has happened 12 out of 16 time with the “Thucydides Trap.” If we do business as usual with the Chinese, we may end up with history as usual. Let’s hope not.

Douglas R. Tengdin, CFA

By |2017-07-17T12:21:18-04:00May 31st, 2017|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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