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- I'm here today with Dr. Kishore Mahbubani.
He is the distinguished fellow
at the Age of Research Institute
of the National University of Singapore.
We're here to discuss his new book Has China Won,
The Chinese Challenge to American Primacy.
Thanks for joining us.
- My pleasure.
- I can't think of a more important playing field
on planet Earth to zoom in and explore
than the one you have chosen.
What inspired you to write this book?
- Well, I see a great tragedy coming
and it's a completely unnecessary tragedy,
this coming geopolitical contest
between the United States and China.
And the basic message in my book
is a very simple one
which is that a geopolitical contest
between the United States and China
is both inevitable and avoidable.
So I try to explain in the main part of my book
why it's inevitable
and why also the United States should really think very hard
and deep before it plunges
into this geopolitical contest with China.
- So where did the pressure mount
that put us on this inevitable trajectory
which is so dangerous?
You can speak to both American and Chinese contributions.
- Well I think it's clear
that both sides have made strategic mistakes
that in some ways led to the eruption
of this geopolitical contest.
But in a more fundamental way
the geopolitical contest
was actually in some ways inevitable
because the history teachers 2,000 year logic
which to some extent Graham Allison has captured in his book
Destined for War,
that whenever the world's number one emerging power,
which today is China,
is about to overtake the world's number one power,
which today is the United States,
that inevitably the geopolitical contest breaks out
and then both get locked into a struggle.
But of course, the other question is
what triggered it now?
And the trigger was caused by strategic mistakes
made by both China and the United States.
In the case of China,
what I try to document in the book
is that there was for a long time
a very powerful constituency in the United States,
the American business community,
that was so engaged with China,
making lots of profits from China,
and therefore that constituency always applied the brakes
whenever the United States seemed to be heading
towards a struggle against China.
- They used to have these treasury reports
and within the currency manipulator
and they always stopped shy of declaring that.
- Exactly, you're absolutely right
and that actually is a demonstration
of the point I was gonna make.
And what happened was that this time around
when Donald Trump launched his trade war,
the logical thing should have been
for the American business community to say stop,
we have a lot of stake with China.
Instead, they just stepped aside
and allowed the trade war
to carry on against China.
So that was China's big strategic mistake.
But as I try to document in the book,
the mistake made by the United States
was in many ways much bigger.
And it was a bigger mistake
because the United States decided
to launch a major geopolitical contest against China
without first working out
a comprehensive, long term strategy
on how you deal with a country
that has got a population
that's four times bigger
and the United States is only 250 years old,
less than 250 years old.
China has been around 2,200 years.
And what is shocking is that no thought was given
to this at all.
And this insight was given to me actually
as I documented the book, by Henry Kissinger,
in a one on one lunch I had with him at his club.
And so that thought led me to investigate further
about what are the potential other mistakes
the United States is making
in proceeding with this geopolitical contest?
So the goal of my book
is actually to help United States, help Americans,
to think very hard and very deep
before they take on an assignment
which future historians will marvel at
that they just jumped in two feet first
without thinking hey, what am I getting myself into?
- Well I sense inside of American political economy
there's almost a page from the playbook of Bismarck.
If you can't solve your problems inside,
look outward and pick an enemy to unify your people.
And the problems,
which you cite very eloquently in the book,
of more than half the population
having a declining standard of living since 1989,
is really quite daunting and quite distressing.
- Yes, you see what I've tried to point out in the book
is that there are lot of misconceptions
that Americans have about their own strengths
and about China's weaknesses.
So for example, it is taken as a given,
it's like ideological certainty
that when a thriving democracy
takes on a geopolitical struggle
against a communist party system,
the thriving democracy will always win,
as it demonstrated in the first world war
against the Soviet Union.
But then if you dig deeper
and you try to understand
what is the core situation of American society today
and the core situation of Chinese society,
you discover that the United States
is actually having to deal
with some major structural challenges.
And one of the key structural challenges
is that the average income of the bottom 50%,
yes 50% of the American population
has been sliding down over a 30 year period.
And as I try to analyze in the book,
this is not just an accident.
This is a result of deep structural forces
in American society
that have moved America away from being a thriving democracy
towards becoming a plutocracy.
And by contrast,
China in the 30 year period
where the average income of the bottom 50% in America
has been sliding down,
in the same 30 year period,
the bottom 50% in China
have had their best 30 years in 3,000 years.
So at a time when the Chinese people
are experiencing the most amazing improvements
in their standard of living,
you must remember also
for most of Chinese history,
the bottom 50% struggled to survive.
They would die in famines and civil wars
and they had a very rough life.
And the last 30 years,
they have access to education, housing, health care, travel,
in a way they never ever had before in their lives.
So after China has gone
through the best 30 year period ever
under the Chinese communist party,
the United States is telling the Chinese people
why don't you get rid of the Chinese communist party?
And the Chinese people are scratching their head
and saying, excuse me, I've had the best 30 years.
And the Chinese communist party is succeeding
because while in theory it is still a communist party,
it is a communist party that is the exact opposite
of the Soviet communist party.
Because the Soviet community party
was run by all operatics.
The Chinese communist party
may possibly be the most meritocratic political party
in the world.
And the selection process
results in the best minds
running China today.
You met some of them - And experienced.
- You know Yan Xishan
you know how brilliant these people are.
So by going into this whole ideological reflex
and saying, hey,
democracies can always overcome communist parties,
the United States hasn't done a deeper analysis
and realized that this is not a contest
within a democracy and a communist party system,
it's a contest within a plutocracy and a meritocracy.
- You talked about it being a party of representation.
How that is maintained,
whether that is stable,
is still true for the last 30 years.
- Yes.
At the end of the day,
running China,
keeping a country of 1.4 billion together every day
is a massive challenge,
which is why for most of Chinese history,
China has more often been divided than united.
So the period like what China has experienced
for the last 30 years
with a strong central government
delivering phenomenal improvement in living standard
to its people
is very rare in Chinese history.
And so if you compare the record in governance
of the Chinese communist party,
especially after Deng Xiaoping launches Four Modernizations
40 years ago in 1979,
it's quite amazing what China has accomplished.
And the Chinese must always measure
the record of their governance
not against what other countries have achieved
but what has been achieved in Chinese history.
And no Chinese government ever in Chinese history
has improved the living standards of the Chinese people
as much as the Chinese community party has.
And you're right,
I call it the Chinese civilization party
because the main goal of the Chinese communist party
is not to promote or to export communist ideology.
The main goal of the Chinese communist party
is to revive Chinese civilization
and bring it back to the standing and respect
that it used to enjoy in the world
for over 2,000 years.
And the key driving force in the Chinese mind,
which I think every American should be aware of
is that the Chinese are acutely aware
that they went through something like maybe 150 years
of national humiliation
starting from the opium war of 1842
going up to the Japanese occupation
and so on and so forth.
So they've gone through a lot of humiliation
and their desire, therefore,
is to regain the respect that China used to enjoy.
And it is somewhat sad that just at the moment
when the Chinese people feel
that hey, we are now finally achieving something meaningful,
that's the time when America decides to slap China.
The only thing to remember is you see,
they're trying to humiliate us again.
- And the scar tissue in the United States
echoes of the cold war visa vie the USSR.
And in your book you do a very nice job
of showing why the Chinese challenge
is very different than the Soviet challenge
in terms of weaponization and arms race,
in terms of ideology,
there are just many aspects
that you desegregate.
- Yeah, well I think you know
the reason why I encourage Americans
to think deeper
is that if they look very carefully
at the track record
of what China is doing
and what the Soviet Union is doing,
it is actually quite shocking
that in the geopolitical contest today
between China and United States,
instead of China behaving like the Soviet Union,
it is the United States
that's behaving like the Soviet Union
because I explain in the book in one chapter, I ask,
can America make mutants?
So for example, the contest between United States and China,
will not take this in the military sphere.
It will be in a nuclear war between United States and China,
there will not be a winner and lower,
there will be a loser and loser.
So logically, it should be
in the interest of the United States
therefore to reduce its defense budget
and take the money and invest in R&D
because that's where the real contest is.
But the United States cannot reduce its defense budget
because no matter how brilliant
a defense secretary you have,
whether it's Ash Carter or General Mattis,
because the process of deciding where to spend money
is locked in by the US Congress
and allocations are made to each constituency
by the congressmen
and therefore the defense budget
is large, irrational and unnecessary.
If the United States was serious about taking on China,
it should cut its defense budget in half
but that's impossible.
And in that so,
it's like the old Soviet Union
that also couldn't cut its defense budget into half.
So in that sense the United States hasn't thought
very hard and very deep
about how different this contest with China is
whereas by contrast,
the Chinese are quite happy,
they're growing their defense budget
but at a fixed percentage of their GNP
and not increasing it.
And the Chinese are very happy
that America has 13 aircraft carrier fleets
'cause each aircraft carrier fleet
is draining millions of dollars away
from the US Treasury every day
and paradoxically, in military terms,
an aircraft carrier today is a sitting duck
and as an American professor,
Tim Colton of Harvard told me,
it just takes $100,000 hypersonic missile
to bring down a billion dollar aircraft carrier.
It doesn't make sense anymore.
So clearly you need to have a fundamental strategic reboot
in American thinking.
And in that sense,
I'm trying to be helpful to America and say,
think very hard
about what are the big changes you need to make.
- One of the things that haunt people who are talking
about "new economic thinking" and technology
is the interface between this rivalry
between the US and China,
digital commerce platforms and cybersecurity.
And the story goes,
these are my friends at MIT again talking
that if you set up a digital platform
it aggregates a lot of information.
Hackers are able to use virtual private networks
and disguise their identity and their whereabouts.
So a hacker can be in Saskatchewan in Canada hypothetically
pretend to be New York attacking Shanghai
or be in Armenia
pretending to be Beijing attacking Washington DC.
I've talked to leaders in both countries,
very high leaders,
they recognize that given all the other tensions
and rivalry and scar tissue from history
and potential for misunderstanding
that they do not have a way to verify,
let's say you make an agreement,
we both pledge our trust
to abide by the cooperative behavior,
with the success and the presence
of disguised hackers,
you can't verify whether that's the case.
And people are struggling now
to try to figure out how to overcome this
because if you vulcanize the internet
and the trading systems,
you're accelerating that polarization
into competing systems.
And I don't know how to answer that
but I think it's a fantastic question to be exploring.
- It is, you're absolutely right.
And this is where one of my key recommendations
in the book is that
if you want to find solution,
there will be, of course, many challenges
in the relations within the United States and China,
not just in cybersecurity, law of the sea,
maritime areas, and many, many other areas.
The best solution is to look for multilateral solutions.
And in the area of cybersecurity and cyberwarfare,
it's good to agree on one common set of rules.
And I'll give you a simple example.
Nowadays with a good hacker can in theory
unleash the waters of a dam, right?
And then can you imagine
the thousands of people who will die
when the dam suddenly bursts, right?
So why not agree on one set of multilateral set of rules,
at least agree on the rules first,
of course implementing it right will be a challenge
but agree we will never attack a dam,
we will never attack a hospital,
we will never paralyze the electricity of a city,
we will never sort of thing.
So you have at least common sets of areas where you agree.
And of course, frankly,
it would make perfect sense
for an American military
to hack into a Chinese destroyer, of course,
that's fair game,
and vice versa too,
so that's fair game
but let's make sure you carve out areas and we say,
in these areas you don't do anything.
But of course, the interesting exception to all this,
and as you know,
since you're a monetary person,
I point out that the real achilles heel
of the United States
is the fact that the US dollar
is the global reserve currency
and that, as you know,
as French then finance minister started saying
exorbitant privilege,
enables Americans to live beyond their means.
So it's in America's national interest
to preserve the US dollar as the global reserve currency.
But by weaponizing it,
the United States has created incentive
for countries to move away from the US dollar.
And it is conceivable
for China to use block chain technology
to create not necessarily a new monetary system
but just a platform that enables countries
to trade with each other
without having to use the US dollar.
And the minute the US dollar
is no longer the dominant currency in global trade,
it can still of course
remain strong in the financial spheres,
but once the critical part of the system
where it's no longer essential for global trade disappears,
the US dollar becomes vulnerable.
And if it is no longer a global reserve currency,
then American standards of living will go down.
And that's another example
of where it is in interest of the United States and China
to work together.
- Thank you for joining us.
- Thank you very much.