Niall Ferguson: Donald Trump Must Split Up Putin and Xi

Cold wars make for odd couples. When Joseph Stalin met Mao Tse-tung in Moscow in December 1949, it wasn’t exactly a bromance. “I have only three tasks here,” Mao complained when the Soviet leader paid him next to no attention. “The first is to eat, the second is to sleep, the third is to shit!”

In the end, Mao got the Soviet backing his new People’s Republic desperately needed. But the price ended up being to fight the Korean War on Stalin’s behalf. [Actualy Mao was more motivated for that one than Stalin.]

That particular odd couple ended up getting a divorce. By 1960, Mao and Nikita Khrushchev were openly criticising one another. By 1969, Soviet and Chinese troops were fighting a border war.

In this new Cold War, the odd couple consists of Xi Jinping and Vladimir Putin. No two world leaders see one another more frequently. Xi has even called Putin his “best friend”. But compared with the 1950s, the roles have been reversed. China is now the giant, Russia the mean little sidekick. China under Xi remains strikingly faithful to the doctrine of Marx and Lenin. Russia under Putin has reverted to tsarism.

For America and its allies, this new odd couple is even more perplexing than Stalin and Mao. In the late 1940s and early 1950s, it was not difficult to discern the menace represented by Soviet power. Faced with a choice between Stalin or Harry Truman, Khrushchev or Dwight Eisenhower, most west European leaders didn’t think twice about taking the American side.

Today, however, the power of the People’s Republic of China is primarily economic rather than military. That makes it much harder to resist. [Yea it’s hard to resist mutual prosperity.] Consequently, the Second Cold War has a number of features that make it quite different from the first Cold War.

The first is that America is so intertwined with China that experienced observers, such as the former Treasury secretary Hank Paulson, argue that “decoupling” is a delusion. The entanglement is not just about trade and investment. It is also cultural. This year there are close to 370,000 Chinese students at American universities. The grand total of all the Soviet citizens who came to America under the 1958 cultural agreement was about 50,000 over 30 years.

The second big difference is that America’s traditional allies are much less eager to align themselves with Washington and against Beijing. This has become most apparent over Huawei, the Chinese telecommunications giant, which is the world leader in 5G equipment. The US government is warning others not to buy Huawei kit. Yet only a handful of countries — step forward, Australia — have signed up for the boycott. Others, notably the British and German governments, are ducking and weaving (not least because no western competitor can match Huawei on price).

The Silicon Valley venture capitalist Marc Andreessen famously said that “software is eating the world”, meaning that the principal trend of the past 30 years has been for the programs of Microsoft, Apple and the rest to transform one sector of the economy after another.

But if software did the eating, the meal was cooked and served by hardware. Without Gordon Moore’s law — that the number of transistors on a computer microchip doubles about every two years — we should not have advanced from the crude word-processing programs, browsers and games of our 1990s desktops to the mind-blowingly powerful capabilities of our smartphones today. That is why the Second Cold War is much more a battle over hardware than anything else.

The illusion of the month is that anything significant was achieved with the signing of the “phase one” trade deal between America and China last Wednesday. In reality, the battlefield of the Second Cold War has shifted away from trade to technology.

It is not just that America is leaning on other governments to eschew Huawei’s hardware. It is also leaning on the world’s leading makers of semiconductors, such as the Taiwan Semiconductor Manufacturing Company, not to sell their top-of-the-range chips to the Chinese. The same goes for companies selling chip-making machines, such as Holland’s ASML.

Moreover, there are other fronts in the new Cold War besides technology. A key battle is taking shape over capital flows, for example. The US government would like to reduce American investment in China. But the Chinese government is energetically wooing western banks and asset managers.

Then there is the monetary contest I wrote about in September. On the one side, America wishes to maintain an international financial system in which the US dollar is the dominant currency for trade and reserves. On the other, the Chinese tech giants Alibaba and Tencent are rolling out electronic payment platforms superior to anything America has to offer, while the People’s Bank of China is about to launch a digital renminbi.

As the Second Cold War intensifies, the role that Russia can play is quite small. It is not a serious player in either hardware or software. [The Russian scientists helping China to build a ballistic early warning system will be surprised to hear that.] And it is financially marginal: nobody wants roubles, because US sanctions have so effectively isolated the Russian economy.

What, then, does Putin bring to the table, apart from a great stockpile of mostly superannuated nuclear weapons and conventional military forces that have performed adequately but hardly brilliantly in Ukraine and Syria? [“Superannuated” or not, there’s no defense against them.] The answer is an unrivalled talent for hybrid or information warfare. [Nice projection, actually it is the West which is unrivaled here.]

Last weekend I paid my first visit to Taiwan, a fascinating island where one can see how Chinese history might have gone had the revolution of 1949 not succeeded. Spared the horrors and privations of Mao’s tyranny, the people of Taiwan have built a dynamic market economy and a vigorous liberal democracy.

Yet they are constantly menaced by Beijing, which refuses to acknowledge their de facto independence and thirsts to subordinate them to the Communist Party. The latest form this threat takes is a massive disinformation campaign on Taiwanese social media. It’s a campaign very obviously designed in Russia, assembled in China.

The Second Cold War will have more than one odd couple. If America is to succeed against China as it succeeded against the Soviet Union, Donald Trump — and his successor — must relearn the lessons of late 20th-century diplomacy. Allies matter, and frenemies are pretty good, too.

Next year will mark the 50th anniversary of Henry Kissinger’s secret flight to Beijing, which set in motion the opening of relations between America and China. It was the pivotal moment of the Cold War, exploiting the Sino-Soviet split by effectively aligning Washington and Beijing against Moscow.

The ultimate goal of American strategy in the 2020s must be to achieve a mirror image of that manoeuvre, driving Putin and Xi apart and drawing Russia into that western configuration which alone can save declining Russia from being swallowed up by rising China.

Donald and Vlad: no relationship has caused Trump more trouble. Will it ever reap a strategic reward? That might just be the Second Cold War’s crucial question.

Source: Niall Ferguson