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- [00:00]
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- [01:38]
Bloomberg Audio Studios Announcer
Bloomberg Audio Studios Podcasts Radio News.
- [01:54]
Tracy Alloway
Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.
- [01:58]
Joe Weisenthal
And I'm Joe Weisenthal.
- [01:59]
Tracy Alloway
Joe, in preparation for this conversation today, I sat down this morning. We're recording on what is it? November 20th.
- [02:06]
Joe Weisenthal
That's correct.
- [02:07]
Tracy Alloway
And I typed us China into Google News results.
- [02:11]
Joe Weisenthal
You just see what the latest is.
- [02:13]
Tracy Alloway
Here is a selection of headlines. US Commission says China could invade Taiwan with little advance warning. China leveraged India Pakistan conflict to trial and tout its military strengths. Pacific Islands on frontline of future US China war and then finally, the US China chip war. Are we ready?
- [02:32]
Joe Weisenthal
I was just going to say I feel like the chips in particular. Every other day there's a different headline about what's allowed or what's not. But to your point, this is the story. I mean, there's AI, there's a couple other things. And then the US China relationship.
- [02:45]
Tracy Alloway
Absolutely. And it seems almost inevitable at this point that we talk about US And China in competitive terms. Right. And also in militaristic terms terms. And this has been going on for as long as I can remember.
- [02:58]
Joe Weisenthal
At this point, it's building up.
- [03:00]
Professor Graham Allison
Right.
- [03:00]
Joe Weisenthal
Like, really in the last decade, you know, when we were younger, I thought, oh, we're just going to trade together and maybe they'll even liberalize and become a liberal democracy one day. It didn't happen. But in the last 10 years or nine years, it's really picked up how much people are framing this in military terms.
- [03:16]
Tracy Alloway
Well, I wrote that paper back in, like, 2002 that China was going to invade Taiwan by the 2008 Olympics. So my view of this might be different to yours. My view has also been proven to be incredibly incorrect. So I'll leave it at that. But, you know, we recorded this episode with Henry Wang a few months ago where we were talking about US China relations, and he mentioned one person and he said, you got to get him on the show. You got to get his perspective on this view of US China competition, and are we doomed, destined to end up in a military conflict? So here we are. We're going to do it.
- [03:52]
Joe Weisenthal
We're in his office. Let's do it.
- [03:53]
Tracy Alloway
All right. We have, in fact, the perfect guest. We have Professor Graham Allison. He is the Douglas Dillon professor of Government at Harvard University, and he, of course, is the one who coined the term the Thucydides Trap to describe the potential outcome of US China competition. So really the perfect person to speak to about this. Professor Allison, thank you so much for coming on Odd lots.
- [04:17]
Professor Graham Allison
Thank you so much for having me.
- [04:19]
Tracy Alloway
So I mentioned the Thucydides trap, and I think a lot of listeners will know what it and probably a substantial portion of our listeners are really into ancient Greek history and know all about it. But when you first came up with that term, was there a light bulb moment in your head where you thought, like, this is the way to characterize the future of US And China relations?
- [04:42]
Professor Graham Allison
So thank you. And the answer is yes. I think I had actually Speaker Kevin McCarthy here at a forum event a couple of nights ago, and he was reminding me that when he was trying to figure out what was happening with China, he called me up and he said, would you give me a tutorial? I said, of course. I'd be honored to. And we started this conversation. And his first question when we began was, what the hell is going on here?
- [05:11]
Tracy Alloway
That should have been my first question.
- [05:13]
Joe Weisenthal
That's a good question.
- [05:13]
Professor Graham Allison
It's a very good question. Here, every day in every way, somehow or another, there's a story about China. Threat, China, competition. China, China, China. I said, in a word, if you're trying to capture this or in a phrase, this is a classic lucidity and rivalry. So China is a meteoric rising power. Never before in history as a nation risen so far so fast on so many different dimensions, a country that we couldn't even find in our rearview mirror at the beginning of the century because it was so far behind us. It's very hard to find in our rearview mirror today because it's either beside us or ahead of us. If you think about a rivalry. So a meteoric rising power. The US Is a colossal ruling power. Never since Rome has a country been so powerful in so many different dimensions for such an amazing period of time. In fact, I just have a piece. They'll be in Foreign affairs next week on the Longest Peace. This is the longest period without great power war since Rome. 80 years. We celebrated in September. Without great power war. Historically, every generation or two for the last few thousand years, there's been great power wars. So amazing, colossal ruling power who's not only been good for itself, but actually good for an international peace. So Thucydides, when he was trying to understand what the hell was going on in ancient Greece, wrote about what he called the rise of Athens and the fear that this instilled in Sparta that made war virtually inevitable. So think about a seesaw on a kid's playground and one heavy is on the one end and one light is on the other, and the heavy is kind of in control. I can jiggle you if I want to, blah, blah, blah. Now all of a sudden the light starts, heavy starts gaining weight, gaining weight, and he gets a little bigger and a little bigger. Pretty soon I'm feeling, wait a minute, maybe I have only one foot on the ground. Maybe I'm feeling less. So when you see this tilt of the seesaw and the tectonics of power, basically this concretes a discombobulation for both parties. The ruling party thinks, hey, wait a minute, what's happening here? I used to look down on you. Now you're looking me straight on. And maybe even so, my my perspective, I used to be able to push a button and things would happen, and now I push the button and the things don't happen because my relative power has changed psychologically. I'm accustomed to being at the top of every pecking Order Americans. My wife says about me, wash the cosmetics off my chest. And it says, USA is number one. Number one is who we. That's our identity. If you do that, television, they scran, you know, whatever. People hold up their number one for their team, whatever, whatever. So the idea that somehow somebody is challenging my position as I used to be the biggest economy, now I have an economy. I used to be the main trading partner of everybody. Now I used to be every. Everything that was made was made by us. Now it's made. So as this happens historically, we've seen over and over this discombobulation that leads then to lots of misperceptions, miscalculations, misjudgments, and unfortunately, in about three quarters of the cases, this ends up in war, often a catastrophic war. So sorry, that's a long version.
- [09:02]
Tracy Alloway
No, no, that's perfect. So Sparta ended up attacking Athens, right, Because they were scared of the rising power.
- [09:08]
Professor Graham Allison
Well, basically, what happened, I mean, it's getting a little more complicated than that. But yes, basically, as the discombobulation was occurring and Athens became more and more full of itself, as the rising power always does, darn it, and the ruling power become more and more fearful, then it turns out that some third party activity in Coursera that wouldn't have mattered to the two parties otherwise. So something that's otherwise incidental or easily managed with throw in a layer of misperceptions and miscalculations and you get there. Another wonderful example, I think the one that's closest to what we're now seeing is the period from 1900 to 1914 that led to World War I. So if you ask yourself how in the world could a assassination of an archduke in Sarajevo, which was so inconsequential that it didn't even make the front page of the newspapers in New York within five weeks, all of Europe was caught up in a war. And when you looked afterwards, people said, how did you guys let this happen? And as Bulow, the chancellor for Germany, he said, ah, if we only knew.
- [10:21]
Joe Weisenthal
So the rising distrust and the anxiety about status, position, it's not that it directly provides the impetus for war per se, but that it creates the conditions such that when there's an incident or an event that, oh, because there's no trust, because there's all this concern, it can be that random thing, an average duke, some people in a third city.
- [10:44]
Professor Graham Allison
Something happens in Taiwan, something happens here, something happens here. So. And because as the, as this seesaw is shifting, as the rising and ruling the tectonics are moving, the misperceptions are magnified and miscalculations multiply and the impact of third party incidents or accidents is amplified. So things that would otherwise be manageable. Hey, this is just nonsense. Let's deal with this problem. All of a sudden I see it as you doing something, and then when I see that you see something, one thing leads to the other. So if you look in the case of Athens and Sparta, Corinth, a city state that neither of them cared much for, and in particular trusted at all, gets involved with Coursera, which is now Corfu, and there's a fear that they're going to have a navy that will be able to challenge Athens so that the Athenians get more excited. So one thing leads to the other. You get a kind of a vicious cycle of misperceptions and miscalculations that then all of a sudden something happens. And once they something happens, oh my God, I have to react. And action and reaction and there you get to somewhere you don't want to go.
- [12:01]
Tracy Alloway
We don't talk about ancient Greek history enough on this podcast, in my opinion, but I do need to bring it up to date. So, you know, some people would argue that China has been on the rise for decades now. And I'm sure people have different starting points, but let's say since the 1990s and, you know, now 30 or 40 years later, we're at a point where there is competitive rivalry, both militarily and economically. But we haven't had war so far, as you just noted, we've had 80 years of peace between the great powers. Which is our good news story of the day.
- [12:33]
Joe Weisenthal
You bet.
- [12:34]
Tracy Alloway
But why is that? And does it mean that you need to reconsider the Thucydian framework?
- [12:41]
Professor Graham Allison
Well, again, Thucydides was very thoughtful about this. He didn't say that there was a specific moment or point in the story. And in the book that I wrote called Destined for Work in the US And China, Escape Through Synergies Trap, I look at the last 500 years and find 16 incidents or 16 cases in which a rising power seriously threatens a ruling power. The World War I being one interesting and dramatic example. So in these, sometimes before the rising power has actually overtaken the ruling power, something happens sometimes after. So it's not that Thucydides not about some specific moment in time, it's about a dynamic that then when something happens, something happens. So if you look, for example, at the Cold War, which is one of the. So in the 16 cases, 12 end in war. If you want a model for war, think World War I. But four ended no war, so that's good news. One of which is called Cold War. So it's called war, but it's not war. It's war in every form but bombs and bullets. So in the Cold War, we had several very, very close calls. For example, the Cuban Missile Crisis, about which I wrote about, and that if you look at that little chart over there on the wall, that's Kennedy's doodles during the Cuban Missile Crisis.
- [14:10]
Tracy Alloway
Oh, that's amazing.
- [14:12]
Professor Graham Allison
Thinking about choices that he's making. He thought there was a between a 1 and 3 and even chance this would end in a nuclear war. If it had ended in a nuclear war, we would have had a couple hundred million people killed. We wouldn't be doing this interview. So it could have happened in that instance, but it didn't. Now, how did it come not to happen? First there was some brilliant statecraft, for example, to get out of an incident that could have otherwise there was a great, great glob of grace and good fortune, I'd say. But also there was a rivalry that went on for long enough in which one of the parties, the Soviet Union, ended up being hollowed out by the contradictions that were part of a Soviet command and control system turned out not to be competitive or the lower. So that's how one story ended. And that could be a possible analog for the current US China rivalry, in which Chinese would say, we see in your divisions in your society and in your corrupt, decadent whatever, whatever, whatever, maybe you'll be the one to.
- [15:23]
Joe Weisenthal
But they perceive us as the Soviet Union.
- [15:25]
Professor Graham Allison
And we, many Americans trying to tell our side of the story, say, well, they're going to be sort of like the Soviet Union because actually they were Communists and blah, blah, blah.
- [15:50]
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- [16:32]
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- [18:03]
Joe Weisenthal
You know obviously we look to the US Soviet relationship for perhaps lessons from history. China feels in many ways very different from the Soviet Union in some ways with respect to foreign policy. You know like I read Henry Dr. Kissinger's book on China and he starts off by pointing out that China has never, never been particularly interested in people beyond its borders outside of the territorial questions say related to Taiwan or Tibet. And even still today it's not obvious that China's interest with the rest of the world expands much beyond the goods trade or trade at all. Does that affect your calculation? The sort of internal when you think about these statistics, the fact that yes there are these patterns of history, but also countries are different internally and may have different motivations?
- [18:48]
Professor Graham Allison
Absolutely. And I think, I mean again you can take it kind of level one, level two, level three, level four, obviously each of the countries story is different. If you look at Portugal and Spain which is the first of these 16 cases back at the time of Christopher Columbus they both were Catholic and there was a Pope. And so when the conflict got to the edge of a conflict, the Pope said I got a solution here's a line. I'm going to draw the line down here. This side is going to be Portuguese, this side is going to be Spanish. That's why people in Brazil speak Portuguese, because they got on the. On the Portuguese side of the line. But you had a situation in which you had a kind of a ruling guru who could make a declaration. Unfortunately, there's no such person today to do that. But looking at the Chinese cases, as you say, China's history has been one in which historically it is wanted to be and thinks of itself as the sun around which everything else rotates. They've got a line about there can be only one tiger in the valley.
- [19:54]
Tracy Alloway
It's literally called the Middle Kingdom. Right. The middle country.
- [19:57]
Professor Graham Allison
And the Middle Kingdom was the meaning of it was the middle between the earth and heaven. So we're that. But not about the Soviet. Not like the Soviet Union wanting to convert everyone.
- [20:11]
Joe Weisenthal
Right. Like China's never had a Comintern, for example.
- [20:14]
Professor Graham Allison
And they haven't been trying to take over territories of other parties other than just in their periphery. And they haven't had an aspiration. Henry actually has a good line about this. He said that the Americans and Chinese are very similar in that both of us have a superiority complex, but only one of us is a missionary. The other one doesn't think people are even good enough to be Chinese. So they'd like for you to mimic their behavior. But they don't think you're ever going to become Chinese. And they don't want you to become Chinese. They don't want you to rule your country the way Chinese do. They want you to have respect and they want to be in their own domain. And I would say that's roughly right. Lee Kuan Yew was the best, most insightful China watcher and Xi China Watcher was Lee Kuan Yew. Lee Kuan Yew was the founder and father builder of Singapore and he was one of my mentors. I wrote a little book about him and he said about China, this is going to be the biggest player in the history of the world. It's going to be very uncomfortable for Americans to get used to it, especially the idea that some smaller yellow race. There's a racial element in the history and whatever he said. But he believed that it was possible that the US and China could find a way, if they were smart, to share the Pacific in the 21st century. And I would say that would be the good news.
- [21:44]
Tracy Alloway
Hope so. Both Joe and I did international relations, I guess, in the early 2000s, late 90s. Yeah, around that time. And a line of thinking back then was that globalization was going to save us all and we were gonna have our economies so enmeshed with each other that the idea of going to war or military competition would just be completely insane because it would mean mutual self destruction. Not with bombs, but with, I don't know, consumer goods like Labubus. I had to throw that in there. Do people still believe that? Because on the other hand, it seems like the central conflict between the US and China right now is economic. But on the other hand, we haven't had outright military war.
- [22:29]
Professor Graham Allison
So good to remember how the cycles go. And I think I remember that period since I've been teaching for a long time. The theory that somehow economic entanglement would prevent war was a famous theory in the beginning of the 20th century as well. So the best selling book in the decade before World War I was Norman Angel's book. I write about this actually in Destined for War, called the Great Illusion. And he said there's not going to be wars anymore because the cost of war will so greatly exceed the benefits that the winner will be a loser. And if you asked Andrew Carnegie, who was the richest man of the time in 1914 for Chris or the Christmas 1913, 14, he sent out Christmas cards to his favorite 4,000 people who included the kids of every state. And he said, there's not going to be war anymore because now we have.
- [23:34]
Tracy Alloway
This, you know, merry Christmas, no more war.
- [23:37]
Professor Graham Allison
Exactly. And he said, and. And I have built the Peace palace at the Hague where people can go and resolve disputes. So it's not going to be necessary to have to fight a war. I would say that's a grand illusion. It turned out not to be. Right now, what's right and wrong about it? Interesting. So is it true that the US and China, both financially and in terms of supply chains and in terms of economy, are so entangled today that this should provide some counterbalance to the geopolitical and military impulses for confrontation? Absolutely right. And this is what you can see in Trump and Xi at their recent summit. I mean, of the people in the current foreign policy world, Trump is a far, far, far outlier in disrespect in that he thinks it's possible that the US and China can actually bother be involved in such a kind of economic relationship that it'll be beneficial to both parties. Now, partly that's because I think he's. So some of the people who are pessimistic about this have kind of given up on American competitiveness and thinking, you know, maybe we're not as competitive. Trump has a kind of a, I think a romantic view that the U.S. kind of win, you know, every race. On the other hand, he also has a businessman's view that it's possible for people to be entangled in ways in which they can be fierce rivals and can also be somehow cooperating. So I've been stretching for silver linings because there's many, many, many things not to like about Trump. But I think it's conceivable if you look and see what he said after the summit when he tweeted, he said it was great success for us. On a 10 point scale. It was a 12 actually. What he understood was he came up against somebody who's as strong and has as many cards as he does. So you have to find a way to cooperate with him. But if that's true, if the both of the parties are searching for ways to cooperate, could this be a stabilizer in what would otherwise be. I would say yes, it could. And could it end up in some kind of a. So Henry, who was my other most mentor about China, kept saying, which Henry.
- [26:09]
Joe Weisenthal
Are we talking about?
- [26:10]
Professor Graham Allison
Henry Kissinger. Okay, sorry. That we need a new strategic concept that's comprehensive enough that encompass the fact that we're going to be the fiercest Thucydides and rivals at all times. Each of us really, really does want to be number one. And it matters in many, many. But at the same time we're so entangled that we require cooperation of the other for our own survival. So this sounds like a contradiction. It is, but we managed a version of that a little bit in the Cold War. This one's much more complicated because the Soviet Union was never really a serious economic rival by the time you got to high Cold War. In the Chinese case, China is a meteor. But is there something in that space? I think there is. How did or might be.
- [26:57]
Joe Weisenthal
So you mentioned that compared to many others, Trump is a US China optimist and maybe even a dove by many measures, which is a little weird given that, but it clearly is. How did this happen? How did so much of the foreign policy elite in the US over the last several years it feel like become so doomer, jaded, pessimistic about the prospect of peaceful coexistence.
- [27:23]
Professor Graham Allison
I think the main driver was structural in the Thucydidean story. So if you look at the British in the period from 1900 to 1914, they become to be more and more shocked by the fact that The Germans are doing things that are supposed to be ours. They're producing something that we're supposed to be in charge of, actually. It's interesting. And I again describe this in the book. There's a famous document called the Crow C R O W E Memorandum. So the King of England asks his foreign minister, he says, why is it that we're being so nasty about the Germans? This is my cousin, Kaiser Wilhelm.
- [28:06]
Tracy Alloway
Literally his cousin.
- [28:07]
Professor Graham Allison
Literally his cousin. They go on vacation together in the summer. And he says, but every time I read anything, every time I see anything, everybody is blaming them for everything. Why is this? And Quo explains to him the seesaw is shifting. And as the seesaw shifts, everybody's perspective is impacted and they exaggerate. And this is kind of like normal. And I think if you look at the Athens Sparta story, you can find a very similar thing. The Athenians are doing what they're doing and the Spartans are talking to each other. These guys are hopeless. Look and see what they do. Every day they get up and they think of some other thing to be mischievous.
- [28:46]
Joe Weisenthal
Just real quickly, if we zoom forward to World War II, in that scenario, is the U.S. the rising power that, that Hitler was completely anxious about? Is that how you fit it into that scenario?
- [28:57]
Professor Graham Allison
I would say The World War II case is a complicated one and, but a good question where Hitler is attempting to become a rising power in a situation that's already stabilized, but then he has actually such territory. Most, in most of the cases, the rising powers don't have great territorial or imperial aspirations in the, in the, in the Cold War, in the Soviet Union. I mean, the Soviet Union did really believe in their ideology that every country should be ruled by a communist government and that they needed to have a continuous expansion in order to basically legitimize their own rule. Fortunately, most cases don't make that.
- [30:02]
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- [31:01]
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Tracy Alloway
No.
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- [32:32]
Tracy Alloway
How much of the current tension between the US And China? Tension, discomfort, discombobulation. How much of that is down to China rising as a power versus the US Declining as a power?
- [32:46]
Professor Graham Allison
I would say in the Good, good question. So in the China's meta narrative, the US Xi Jinping, or when they're talking, it's the inexorable rise of China. So they're as confident and he's as confident that they're rising into what will be a Chinese century as Teddy Roosevelt was if you take the equivalent period in American history. But the other component of this, which was not part of Teddy Roosevelt's was that the US's irreversibly declining.
- [33:22]
Tracy Alloway
That's what she believes.
- [33:23]
Professor Graham Allison
That's what she believes. And the person who works for him, who is his number four and his closest ideological person is Wan Huning. Now I've, by some accident of good fortune have become one of their people whom they. One of the people whom they enjoy talking to. I think mainly because Kissinger, I'm, you know, was his mentor or Mintee, and because I introduced them to Thucydides, I mean, as the best publicity agent for a author than anybody ever had in China, because they've sold more copies of Thucydides, Peloponnesian War in Mandarin since my book than in the previous 2000 years. So any case, Wan Huning is a serious thinker. He was a political scientist originally. He came to the US in 1989 on an American Political Science association fellowship or something, to study at a university or to be a fellow at a university. And then he traveled all around the US and he wrote a book. It's called America Against America. And you could go, and it's in English, you could see the English comic. And it's a. As the analysis of the factors that were going to splinter the country. It's pretty good for the time. Pretty. And they clearly continue thinking about that. I was there just before the Trump XI summit in Korea talking again to a couple of people in the first circle and they were saying about the us. You know, the us. I mean, here's one guy, he was just stranger than we thought. I said, what's strange? He said, well, let me just, Let me give you, just start analysis. He says New York is, the city, is the largest Jewish population in the world and they're going to elect a Muslim mayor. New York City is the epicenter of global capitalism. They're going to elect somebody who's a socialist. We're socialists. The US is. The government is providing food for one in nine people in the us and now they're talking about withholding it. We used to do that, you know, when we had people who were poor. But we think that's one of our great achievements. We don't hand out food and people have food. The US is sending troops to cities. Said, we remember Tiananmen. Is this like Tiananmen? I said, no, this is not like tin. So, you know, the division of income has now become so great. They said, we saw this data that two thirds of the consumption is now by the top 20% of the income earners. Well, excuse me, in most societies the people who are being left out would riot. That's probably why we say we have to be a modern socialist state, because we have to have. So, you know, they're going down the list like that. I said, what you have to remember is this is a strange country. It absolutely is.
- [36:58]
Joe Weisenthal
A land of contradictions.
- [37:00]
Professor Graham Allison
Contradiction, I sometimes say. A kaleidoscope of contradictions.
- [37:04]
Joe Weisenthal
Yeah.
- [37:05]
Professor Graham Allison
Because every time you move it, it's another one. On the other hand, it's been remarkably resilient, and no other society with no other governing system has been as successful over so long a period of time as this one. And then I usually do my lines about God looks after drunk little children in the usa, but I would say a reasonable person could look at the country today and say, this looks pretty strange.
- [37:29]
Odoo Advertiser
Yeah, yeah.
- [37:30]
Joe Weisenthal
So obviously, there are the big structural questions that will last for a long time. Both China's economic rise, US Internal tensions, et cetera. But this year in particular, Tracy started the episode with all these headlines, and that's daily. And Trump himself is, you know, there's the contradictions within the White House, et cetera. But just the events of this year, have they. From today, from January 1st to today, or from the inauguration to today, have your views changed? Are you more optimistic, less optimistic? Like how? What have you learned in 2025?
- [38:02]
Professor Graham Allison
That's a good question. So I would say ⅓ or 80% of the story is baked into the structure.
- [38:10]
Joe Weisenthal
Yeah.
- [38:11]
Professor Graham Allison
So if. And as China continues rising, which I believe it will, and growing at about twice the rate we do, which I think it will, and advancing in technologies the way it has been, which I think it will, even though it has many, many, many, many problems. But I think they'll manage more or less on that path. And Americans will wake up more and more every day that China is in your face doing something, whatever. So that's point one. Point to. In this Thucydidean rivalry, again, it's natural for the ruling power to blame the rising power for everything. And blaming China or hyping China threat or demonizing China is kind of normal. And I would say the Spartans were demonizing the Athenians. Maybe not quite to the extent. So for Americans, we do it our way, but I would say that that part is right. So those are the negative components. While it may seem strange, especially in Cambridge, for somebody to look for some signs of hope or silver linings in Trump, I think Trump understands that nuclear war would be catastrophic and really, really worries about that in a way that the only other person in the foreign Policy establishment equivalent lately that has done that was Biden, not Obama, not 80% of the others. So that's number one. More, he understands. Very, very bad. Secondly, he somehow he has this respect for Xi. He admires China. Some of what he admires is their autocratic rule. He says, how in the world did you manage to rule 1.5 billion people with so little objection? I wish I could manage my press the way you do, you know, blah, blah, blah, you've got a lease on life. I mean, he's leader for life. Does anybody have any suggestions for me? So he admires that. He wants to be a great peacemaker. So I think it's not inconceivable that we might come to have a strategic concept that would be something like a partnership, which would then balance, I think. Will the Thucydides rivalry continue in every case? Yes, I believe it will. And will it mean that this feeds of fear and all the things that will be normal? But if it's also the case that my survival as a country depends on a degree of cooperation with you so that we don't have a nuclear war, because at the end of a nuclear war, my country's gone so that AI doesn't end up ruling us all. We're the two AA leaders. So could we find some. So financial system. In 2008, we would have had a. The financial crisis would have become a depression had it not been for a joint US China trade. I mean, if we look at the rare earth story, I mean, that's what those are there. Oh, yeah. Okay.
- [41:07]
Joe Weisenthal
I was fiddling with this piece of metal on Graham's table.
- [41:10]
Tracy Alloway
We were going to ask. So there are a bunch of. These are mission coins, is that right or.
- [41:14]
Professor Graham Allison
Oh, these are just from services. But this here, see if you can separate it. These are rare earth magnets. And you can see.
- [41:25]
Joe Weisenthal
Wow, that's a strong magnet.
- [41:27]
Professor Graham Allison
Careful. Okay, that's okay. But in any case, we'll get it. We have become dependent upon China for how many things in our supply chain, and they fortunately depend on other sorts of. For how many things. So part of the reason why they got the stalemate in the current, what would otherwise be, you know, Trump's bullying another country, is that he comes up against somebody as strong as we are. So in that case, he's adapting and adjusting. Though I would say, you know, if I'm looking for silver linings, I'm looking in that space.
- [42:01]
Tracy Alloway
I hate to end on a down note and I'm conscious of the time and you have to Run off. But in terms of the US China Cold War turning into a hot war, what should we be looking out for? Because as we started this conversation, every day there's a new headline about, you know, China's moving this naval vessel into this particular body of water and there's propaganda airing in China that's prepping the population for an imminent Taiwanese invasion, that sort of thing. What would you actually look for as a warning sign?
- [42:32]
Professor Graham Allison
So I think most of the newslines that we hear or statements from people are China hype. And you cannot accuse China of anything today in the US without getting a residence. So nobody, I mean, I get blamed occasionally for being a China sympathizer by simply saying what you're asserting is false. Yes, of course, there's many, many things China's doing, but it does. So, for example, one of the favorite clauses now is China has the fastest nuclear buildup in the world because they're going from about 500 weapons to about 1,000 weapons in 2030. Which answer is, well, that's a historical statement. And if you look at the number of warheads we went to from in the Eisenhower period or the Kennedy period, in both cases, there were more, though, just happened not to be true. But there'll be many, many, many accusations of that kind. And I think those will continue because. So China has developed a manufacturing ecosystem that basically can produce anything at scale at half the price that we can. Well, lo and behold, if you go to Walmart, sorta to Home Depot, half the stuff or more is made in China. Well, people will complain about that. So that part seems right. But I would say that most of this is just hype. Where you find danger is where there are third parties whose initiative might, in this, like the story of Coursera, produce a set of reactions. And they're the most. The leading candidate, Taiwan, and the current president of Taiwan, Lai, who's taken many, many dangerous actions. I think, fortunately, both in the Biden administration and in the Trump administration, they've had conversations at the leader level about not letting this person by some irresponsible action drag us off to them. The other is that the Chinese rules of engagement in their exercises in the Straits and in the South China Sea are now such that it's not very difficult to imagine a collision of a ship or a plane. We saw that at the beginning of the Bush administration when they collided with one of our spy planes. So could that escalate? And I think that's why, again, getting back to communication channels between the two parties where they can Talk candidly and privately in order to have a circuit breaker if some accident happens, which I think on the current path would be likely to happen.
- [45:18]
Tracy Alloway
I'm going to ask one more very quick question because you brought up manufacturing just then. And something else that we've been noticing lately is there's a tendency among a lot of Western economies especially to talk about building up their own manufacturing capacity, including in terms of munitions and rare earth minerals. As you just mentioned, there was a headline, I think, just yesterday about the UK wanting to build ammunition within its own borders instead of relying on allies. What's the underlying motivation there? Because most people would look at a headline like, the UK wants to make its own bullets, as, you know, a predecessor maybe to some sort of military conflict.
- [45:58]
Professor Graham Allison
Well, I think it's good. It is puzzling, and there are a lot of puzzling things, but I would say that whenever it's pointed out to people that you're dependent on some other party for supply of something. So, for example, for the US Rare earth magnets are required for almost everything. So for cars, for iPhones, for laptops, for F35s, for Tomahawk missiles or whatever, how would we allow ourselves to be dependent on China? Because that gives them something that they can squeeze that supply chain and be coercive. So I would rather be independent on that. And so any politician would then make an announcement, okay, we're declaring that we're going to be independent, asking what would be required to be done in order to reach that stage. People are not asking. So that would be at the next level. Similarly, if you look, for example, for most pharmaceuticals, most of the pharmaceuticals and the pharmaceutical precursors that we use for any medicines come from either China or from India. Well, maybe we should do these ourselves. Munitions. We shouldn't be giving out a. So the fact that politicians, when they see somebody says, here's a dependency or a vulnerability declared that we're going to be independent is, I would say, predictable. If you look and see what behaviors follow from that, the answer is not very many. So I'm almost ready to accept the proposition that we're going to be inextricably entangled in supply chains and economics, in which case some version of mutual deterrence of the sort that we found in the nuclear balance may be where we end up. Now, is that a good place to be compared to the elsewhere? No, I'd rather be independent, but compared. I mean, is that something we can manage? If you have competent governments managing it, I would say, you know, yes.
- [48:05]
Tracy Alloway
All right, Professor Allison thank you so much for coming on odd lots and inviting us to your office here at Harvard. Thank you so much. Yeah, a lot to look at.
- [48:14]
Professor Graham Allison
Honored to have you here. Glad to be on the program. I thank you. Good questions and glad to see two serious students of international bears.
- [48:23]
Tracy Alloway
We took our IR background and went into financial.
- [48:26]
Joe Weisenthal
Just the highest praise I've ever gotten.
- [48:40]
Tracy Alloway
Joe, that was real treat.
- [48:42]
Joe Weisenthal
It was a real treat. Just being in Dr. Ellison's office was really nice. I just. I could go. You've heard me already say this, but, like, being a professor at an elite American university.
- [48:53]
Tracy Alloway
A tenured professor.
- [48:54]
Joe Weisenthal
A tenured professor. That's so sick. And then, like, it was like such a. It's like such a dream career to have.
- [49:02]
Tracy Alloway
You know, what bothers me is you and I both did international relations.
- [49:06]
Joe Weisenthal
Oh, yeah?
- [49:06]
Tracy Alloway
Yeah. And I think we have a similar complaint. But like, that conversation that we just had with Professor Allison was what I thought international relations was going to be. You know, we were going to sit there and. And pontificate about US China relations and then compare it to Sparta versus Athens in ancient Greece. And instead it was basically all philosophy. It was like game theory.
- [49:28]
Joe Weisenthal
Yeah, I know. It's such a drama.
- [49:29]
Tracy Alloway
And like, it was so abstract. Like, I think I had entire courses where we didn't even name a single country, like, by name. It was just, if country A does this, what does country B do?
- [49:40]
Joe Weisenthal
It's such a weird discipline for that reason. And as an adult, I've tried to read some international relations books, and it's all this like, weird game theory and tables and stuff like that, and just not my thing. I think there's. There's probably. I know we're going off on a little bit of a tangent here. It feels a little bit like, you know, the same phenomenon in economics, for example. Like, you study economics, you're. You're going to think about, like, well, what's going to happen to the unemployment rate, what's going to happen with the stock market, et cetera. And then you read academic economics, and I'm not as, like, you know, I'm like, as I've grown older, as I've matured, I'm like, you know, I've like, I appreciate academic econ more than I did when I was in my youth. And I was like, oh, it's all this dumb with all these equations and stuff like that. It's all fake. I don't think that is much anymore. But it does feel like, kind of disconnected from like. Wait, I thought economists talked about, you Know the unemployment rate and stuff like that. And then you read what a paper is about.
- [50:38]
Tracy Alloway
It's very abstract. You're right. One thing that did surprise me was when the professor was talking about his latest trip to China. Was it his latest trip? Well, one of his trips to China where he was talking and trying to, or hearing from Chinese policymakers about how they're very confused by America and in particular the example of capitalist New York electing a socialist mayor. And I thought like, if, if anyone can understand socialism with capitalistic characteristics, it must be the Chinese. Right?
- [51:09]
Joe Weisenthal
It should be very intuitive. No, I thought that was just overall though, I mean it was a little bit grim. The idea that almost like we're kind of on borrowed time here. It's like it's been a really long time since the Great Powers War by historical standards. And so it's already been a long time. Historically they come along more frequently. And now the conditions are in place for this, you know, the so called Thucydides trap as he sees it. I'm not thrilled that in the best case scenario for the rest of my life, there's always going to be a risk of that being right around the corner the moment some third party country does something, you know, off the leash.
- [51:48]
Tracy Alloway
The other thing. And again, this goes back to why I'm so frustrated with IR as an academic discipline. But like the emphasis on good statecraft. Good statecraft makes a difference. Right. You know, he talked about the Cuban Missile Crisis and jfk and we came very, very close to absolute disaster there. But it was ultimately averted by the individual actions of human beings, both in Russia and in the us And I feel like that's kind of what's missing in ir. It's that like emphasis on individual choice and motivations and incentives and how to actually do good statecraft rather than just like look at everything through the prism of either neoliberalism or realism or power.
- [52:31]
Joe Weisenthal
Yeah.
- [52:31]
Tracy Alloway
Or did you ever do gender theory?
- [52:34]
Joe Weisenthal
I don't think I took that.
- [52:35]
Tracy Alloway
There's an interesting one. The reason we have the Cuban Missile Crisis is because men and large objects.
- [52:42]
Joe Weisenthal
I am really interested in this idea that unlike the us so he used the term, I think he said missionary, sort of to characterize how the US sees spread democracy and liberalism and capitalism. And of course the Soviet Union also had this impulse to spread communism. And everywhere there was a Communist party, it felt some tug to back them up. And that's how the Soviet Union got mired in Afghanistan for years and years. China doesn't really seem to have that. It wants to trade. I mean, outside of it wants to consolidate its physical territory. But it does not seem like there's a great story. Several months ago, apparently the Cubans came to China and asked for advice and said, well, have you tried liberalizing your economy? Have you tried basically not being communist? It doesn't have that impulse the same way the Soviet Union did. Nor does it have it like the US Does. So I'm curious, as China truly becomes a global power, as a great power, it seems fairly rare historically for it to have so little interest in how other countries manage their affairs.
- [53:50]
Tracy Alloway
Yeah, I enjoyed the line about, you know, like, it's not really about getting more people to be Chinese because it's special to be Chinese in the first place.
- [53:59]
Joe Weisenthal
We're not good enough to be Chinese.
- [54:01]
Tracy Alloway
Yeah. All right, shall we leave it there, Chinese Joe?
- [54:03]
Joe Weisenthal
Let's leave it. Let's leave it there.
- [54:05]
Tracy Alloway
This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Allaway.
- [54:10]
Joe Weisenthal
And I'm Jill Weisenthal. You can follow me at the Stalwart. Follow our guest Graham Allison. He's Ramt Allison. Follow our producers Kerman Rodriguez Ermenarman, dashiell Bennett at Dashbot and Cale Brooks at Kalebrooks. For more Odd Lots content, go to bloomberg.com oddlots we have a daily newsletter and all of our episodes and you can chat about all of these topics 247 with fellow listeners in our Discord, Discord, GG Oddlaws and if you enjoy.
- [54:37]
Tracy Alloway
Odd Lots, if you like it when we travel to Boston to interview Harvard professors, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg Channel on Apple Podcasts and follow the instructions there. Thanks for listening.
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Tracy Alloway
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Professor Graham Allison
Milano mint chocolate.
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Tracy Alloway
So rich.
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Professor Graham Allison
Chessman butter cookies.
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Joe Weisenthal
So buttery.
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Professor Graham Allison
And Lindsay Raspberry.
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Joe Weisenthal
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Tracy Alloway
Vintage timepiece.
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Joe Weisenthal
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Professor Graham Allison
Now that's fancy.
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