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Sept. 6, 2022 - The Ben Shapiro Show
44:02
Are We On The Precipice Of Global Collapse? | Ep. 1568
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Time Text
Historian Neil Ferguson explains we may be entering the 1970s again, so we examine the evidence.
Joe Biden doubles down on his aggressive attacks on his political opponents, and Donald Trump responds, and Chile averts disaster.
I'm Ben Shapiro.
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For a lot of Americans, me included, what's happening right now in history, global history, American history, feels like an inflection point.
It feels like we're on the precipice of something, and it's not clear exactly what we're on the precipice of.
Are we on the precipice of a sort of global recovery where the West regains its strength?
Are we on the precipice of a really chaotic and tumultuous time?
Are we on the precipice of the 1910s, the 1930s, the 1970s?
Kind of unclear what the historical precedent is.
Well, historian Anil Ferguson did a fascinating interview over the last couple of days that is well worth watching.
It's an interview that he did talking about the situation of the globe.
Ferguson has written a number of really important books.
He wrote a great book about the history of finance called The Age of Money.
He has a great two-part history of the Rothschild family.
He wrote books on the First World War and the Second World War.
He's one of my favorite historians.
And in this interview, he explained where he thinks we are in history.
And he says that he thinks that the globe is on the verge of the 1970s, that we're all sort of happy talking past the reality of the situation.
Here he was.
The ingredients of the 1970s are already in place.
The monetary and fiscal policy mistakes of last year, which set this inflation off, are very like the mistakes of the late 60s.
And then, as in 1973, you get a war, except that this war is lasting much longer than the 1973 war, and so the energy shock that it's causing is actually going to be more sustained.
So the question that I'm asking myself is, yeah, it looks a little bit like the 1970s, But are we sure it's not going to be worse than that?
I mean, most people, when you have this conversation, kind of assume it can't be that bad, and they can't really envision double-digit inflation in the US, but we're already there with the UK.
The number of countries with double-digit inflation in the world is already north of 40, and it will soon be a higher number than that.
And so I asked myself, why shouldn't it be as bad as the 1970s?
Why shouldn't it actually be worse?
That was Neil Ferguson speaking to CNBC at the Ambrosetti Forum in Italy.
So if you look back at the history of the 1970s, what you're talking about is significant price shocks, wage controls in the United States, serious stagflation, a lot of global foreign policy turmoil, ranging from the detente that the United States actually had with China, to conflict between China and Russia, to the chaos in the Middle East, The 1970s were a very, very bad time in American history.
They were then followed by the 1980s, which were a much better time in American history.
But what I wonder is whether we're entering the 70s or, as Neil Ferguson says, something significantly worse.
I want to quote Neil Ferguson about the lead up to World War I. This is not a suggestion that we're about to enter World War I. The conditions as we're about to see don't quite apply.
But some of the factors That led to the global chaos of World War One, where everybody was sort of sanguine about how everything was going.
Well, it's going to be OK.
I mean, after all, these countries aren't going to go to war.
Everything will be fine.
High levels of globalization, high levels of travel, high levels of intercultural exchange.
The idea, if you went back to 1908 and you ask people, is there going to be a global world war in 1908?
The answer is everybody says no.
The truth is, even in 1914, if you ask most Europeans whether there is going to be a global world war, everybody was going to say no.
In fact, as Ferguson talks about in his book, The War of the World, He says that if you look at the bond markets, like on the eve of World War I, even the people who had their money in the investments were saying, no, there's not going to be a war.
I mean, we're going to avert this thing.
He says that there are a few things that led to the sort of global conflict that you saw in World War I and World War II, does Ferguson in his book.
He says this, three things seem to me necessary to explain the extreme violence of the 20th century, and in particular, why so much of it happened at certain times, notably the early 1940s and in certain places, specifically Central and Eastern Europe, Manchuria and Korea.
And understand that for Ferguson, World War One and World War Two are essentially the same war that one basically bled into the other.
This is how most historians see World War One and World War Two, not as two distinct wars, but essentially a European 30 years war second time around.
Well, these may be summarized as ethnic conflict, economic volatility, and empires in decline.
By ethnic conflict, I mean specifically the breakdown of sometimes quite far-advanced processes of assimilation.
By economic volatility, I mean the frequency and amplitude of changes in the rate of economic growth, prices, interest rates, and employment, with all the associated social stresses and strains.
By empires in decline, I mean the decomposition of the multinational European empires that had dominated the world at the beginning of the century, and the challenge posed to them by the emergence of new empire states in Turkey, Russia, Japan, and Germany.
We should go through each of those factors because as you see, not quite to the same extent, a lot of these sort of forces are breaking loose today.
So in just one second, we'll get into each of these factors that Neil Ferguson talks about with regard to the chaos of the early 20th century.
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So ethnic conflict, this idea that there were ethnic groups that were living amongst larger ethnic groups, and that as nationalization took over for empire, you started to see extraordinary stress inside nation states about their minorities.
You're seeing this happen in Europe with regard to, for example, Muslim immigration into Europe.
You're starting to see this in the United States with regard to a lot of these sort of intersectional racial and ethnic tensions that you've seen rising in the United States.
When it comes to economic volatility, one thing that Ferguson points out is that economic volatility that generally leads to social instability, it doesn't have to be in a context of Great Depression.
It can also be in the context of just economic dislocation of radical changes in the economy that no one sees coming.
So, for example, the kind of shock that we saw over the period of COVID followed by this period of severe inflation.
The radical movement away from an industrialized economy in the West to a service economy in the West.
All these sorts of things are major economic shocks to the system.
And when you look at radical changes, objectively speaking, in economic growth rates and prices and interest rates, what you're seeing is people being whiplashed around is making people very uncomfortable and more likely to look for authoritarian figures to lead them through.
And when he talks about empires in decline, and we don't tend to think of the world is filled with empires these days, but the truth is there's still a fair number of empires in the world today.
In fact, you'd have to say that there are at least four empires in the world today.
The United States, effectively speaking, is an empire.
We may be a benevolent empire, we may be a liberal empire, but we are definitely an empire.
If you see the number of places where the United States has troops, the answer is over a hundred countries.
We have troops all over the world.
We have places that we help to prop up.
We have systems that we help to fund.
The United States is just as much of an empire in its own way, not quite the same as the British Empire where we actually had a colonial outpost in India that were actually ruling the place.
But the United States is a quasi-empire, the likes of which we haven't seen since the British You have the Russian Empire.
The Russians have always thought of themselves as an empire.
And if you look at the vast territorial expanse of Russia and the fact that now they are attempting to take over places like Ukraine again, Vladimir Putin certainly sees himself as an imperial force.
China is an empire.
Outside of China, we like to think of China as a sort of unified country, unified bloc.
If you look at the history of China, there's always been Interethnic conflict in China, a lot of tribes in China.
The Chinese empire is extraordinarily expansive.
And then the EU is effectively an empire.
We can talk about the fact that the European continent has a bunch of independent nations that are no longer at war with each other.
But the simple fact is that the EU overall, as a trading bloc, as an economic bloc, and as a polity, because people tend to work in concert inside the EU, that's effectively an empire on its own.
Now, these are not colonialist empires the same way we had at the In the late 19th century, early 20th century, you don't see, for example, colonial outposts in Africa.
You don't see, as I say, European outposts in India.
That's not a thing you see.
But the idea that you have these broad, expansive, powerful countries with reach beyond their own borders, There's no question that that exists.
And right now, you are starting to see the weakening of these various empires.
And what replaces them is not quite clear at this point.
There's been a lot of talk in the United States about the possibility of, for example, civil war.
The possibility of people breaking apart.
At the very least, the possibility that the states become significantly more powerful and the federal government become significantly weaker as Americans have less and less in common.
You see in the EU with Brexit, you see with the inability to actually foster a common economic system because Greece doesn't operate the same way as Germany.
You've seen nationalist stressors against the EU's sort of economic empire.
In China, there's significant stresses inside the Chinese government, which we'll talk about in just a second.
And obviously in Russia, we see a dramatically weak economy, bad demographics, and extraordinarily aggressive foreign policy.
So in other words, a lot of the forces that tend to militate in favor of global conflict are in play.
And I think it's worthwhile to look at some of the areas of danger, where it looks like not just economic breakdown and And global economic discontent, which tends to lead again to the rise of authoritarian leaders, both right and left.
But it's important also to look at the comparative power structure of the globe.
When we get closer to economic parity, for example, between one empire and another, sometimes that tends to raise the risk of conflict.
When one empire goes to sleep, which was the story with the British empire in the late 19th century, early 20th century.
Things tend to get really bad.
There are a couple of ways that you stumble yourself into war.
One is you have an ambitious country that's attempting to take over for another country, to supplant another country, which is sort of what happened with Germany in World War I and World War II.
The second way, and usually these are combined, is that the dominant empire goes to sleep at the switch, and this incentivizes challenging countries to actually go for it.
Just as you would see in a pack of primates where the alpha is challenged, this tends to happen in global politics as well.
So I want to look at a couple of factors here to kind of assess where we are historically speaking.
I want to look at GDP by country so we can see where we are vis-a-vis historical precedent and military spending by country.
Because the truth is that when we talk about global economic power, we talk about global hegemony for the United States, everything is comparative.
Everything is relative.
This is why when I talk about, for example, America's climate change policy, I always say we're not doing this in a vacuum.
What is China going to do?
What is Russia going to do?
This is why when we talk about the economics of the United States, I have always said and will continue to say that economics, the economic strength of the United States is what backs our global power.
And if we hamper ourselves, we hamstring ourselves, we're not doing that in a vacuum.
These things have externalities.
So let's go.
I want to look at three critical periods in world history right now, looking at these factors, GDP by country and military spending by country.
And as you can see, these two things are very connected.
And when there is a challenge to the global hegemon, or at least to the leading power, what you end up seeing is war.
And it's starting to look more like that than not like that these days in 2022.
In just one second, I want to get into some actual stats and charts about GDP and military spending.
It gives you a little bit of historical context for where we are right now.
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So the three periods we're going to look at are the period immediately preceding and then in the middle of World War I, the period immediately preceding and in the middle of World War II, and then the period from 1966 to the end of the Cold War, and then finally we'll look at the modern period.
So we're going to look at three and then the modern period.
So let's start by looking at the period leading up to World War I. So this is the top countries by GDP as of 1910, right before World War I.
What you see is in terms of the global economy, the United States is far and away the leader in terms of GDP by country.
And as you see, Germany is number two, right?
Germany is growing.
And then you see war breaks out.
And when war breaks out, the United States just leaps far ahead of the others because they are all depleting their GDP to go to war with one another.
But if you go back to the beginning of this, I go back to 1910 for just one second.
If you go back to 1910 for just one second, what you see here is that the British Economy is the strongest, right?
You're looking because it's the British Raj and the United Kingdom, right?
Places ruled by Britain are far and away the globe's largest economy.
Not far and away.
I mean, challenging the United States.
Basically, they're a parody.
If you look at the British Raj and the United Kingdom, those combined look like the GDP of the United States.
Germany, however, was larger than the United Kingdom just in pure terms of GDP.
So Germany has now risen and is challenging for supremacy on the continent.
Germany is far outpacing France, for example.
And then when you look at the combined power of the powers that are about to go to war, you look at Germany, you look at Austria-Hungary, you look at Italy, You look at Japan.
When you look at these countries, you're starting to see something that looks a lot more like parity.
There's a lot of close competition.
And so what Germany is thinking is, if I'm impoverished by one of the surrounding powers, if Austria-Hungary looks at Russia and says, I'm surrounded by an imposing power in the east, I got to go to war now because otherwise I'm going to lose the opportunity to go to war.
And that's exactly what you see.
And by the end of World War I, the only country basically left standing, economically speaking, and again, you can fast forward in time here, by the time you hit about 1919, the United States It's just blowing everybody else away because they've all ruined themselves in war.
You can see that the UK, the British Raj, all of these are dropping relative to the United States.
United States continues to grow during the war.
By the time you hit 1916, the United States is basically doubling the next country.
By the time you hit 1919, you're looking at the United States with an advantage over every other country in terms of GDP by a factor of about three.
So what ends up happening here is the country that benefits is the country that stays out of it, right?
The United States enters very late in the war.
But the United States, again, was started as the dominant economic power.
Now, if you look at military spending in that same period of time, if you look at the military spending 1910 to 1919, this is also why you see World War I breaks out, right?
World War I breaks out because look at that spending in 1910.
Almost sure parity between the Russians, the UK, the Germans, the United States, and France, right?
They are all within just a small margin of one another.
And the buildup to World War I What you will see here is that the Germans start building up pretty dramatically.
Let me play the video.
So the Germans, the UK starts to challenge the Germans in terms of military spending.
The Russians then really start building up.
The Germans, out of fear of the Russians, really build up.
Right, and now you see the Germans are just outpacing everybody.
The UK ramps up because the UK has the power, economically speaking, to challenge the Germans as the war goes on.
Now you can see, again, where is the United States here?
The United States is way down at the bottom because the United States is not involved in the war.
Now watch what happens when the United States joins the war.
Boom.
Okay, look at the United States.
It's crazy, right?
Economic power means global power.
Economic power.
Look at that.
It's insane, right?
By 1919, the United States is just far outweighing everybody.
By 1918, the United States is just blowing everyone else out of the water in terms of military spending.
And by the way, a thank you to Ranking Charts.
That's this YouTube account for putting together these charts.
They're beautiful charts.
So the United States, by the end of World War I, is just blowing everybody else out of the water.
So what does this say?
It says, when there is a misimpression of global parity, Then war is possible.
And when war breaks out, the country with the strongest economy tends to win.
You're about to see the same thing with regard to World War II.
So let's fast forward to 1935 to 1946.
So here's the GDP by country.
Okay, in 1935, as you see, the United States is far out ahead in terms of GDP, but the UK is second.
Hey, as we move closer to war, look at the UK, look at the United States jumping out ahead.
The UK is dropping and Germany is rising.
By the time you hit 37, 38, Germany is now the number two economy on planet Earth.
The UK is behind.
Hey, this means Germany feels like it's got to go.
War breaks out.
All of a sudden, the United States jumps ahead because everybody else is fighting each other.
By the time you hit the end of the war, the United States is so far ahead, you can't even see the other countries in the rear view mirror.
The United States is just way the hell ahead because everybody else has wrecked themselves in war.
The United States is now clearly the global hegemon by this point in time.
Again, the United States is uniquely well placed because we are not part of the European continent, so we didn't have to get involved in that war until significantly later.
But what led to the war partially is Germany thinks, okay, we got to go.
Now you can see this by military spending during that same period as well.
This is kind of fascinating.
So look at the military spending.
So Nazi Germany is threatened by the Soviet Union.
The Soviet Union is spending more money than anybody else.
The Nazis are second.
The UK is way the hell down.
In this particular chart, 1935, the Nazis are spending more than twice as much as the UK is on military spending.
The United States is spending only about half as much as Nazi Germany.
The Soviets are really far ahead.
So, when the Molotov-Ribbentrop Pact is signed, and you have the Soviet Union and the Nazis on the same side, that is why Nazi Germany goes.
I mean, Nazi Germany is like, okay, well, we're never going to get a better time than this.
I mean, we signed this agreement.
The two leading military powers in terms of spending on planet Earth are in the same corner.
And then meanwhile, you've signed an agreement with Japan not to attack the Soviet Union.
Remember the Soviet Union and Japan, Russia and Japan had gone to war in 1905 before the Soviet Union.
Anyway, you can see the top countries by military spending during this period, right?
Soviet Union way out ahead, Nazi Germany second.
Now, as you will see, economics always wins, okay?
Because military power is a reflection of economics.
So, as you will see, during World War II, the United States is about to just do exactly what it did during World War I. Once the U.S.
gets involved, the United States jumps way the hell ahead of everybody.
So, Nazi Germany ramps up the spending.
Look at the Soviet Union, Nazi Germany in 1935-36.
Look at that.
They are way ahead.
I mean, they're just dominant in terms of military spending.
The U.K.
is spending, but not nearly at the same rate as the Nazis and the Soviets.
The U.K.
ramps up because the U.K.
still has a powerful economy.
But they can't reach the spending level of Nazi Germany.
France gets taken out of the war.
Vichy France is now effectively not even... Look at the United States get involved in 1941.
Watch how fast the United States ramps up.
It's just amazing.
The power of economics, gang.
When you have a strong economy, you are capable of ramping up in times of war.
By the end of the war, the United States is spending four times as much, seven times as much as the next greatest power in the UK is able to spend at high rates.
By 1946, you see the Soviet Union beginning to challenge the United States.
We'll get into more on where the United States stands in sort of global historical perspective with regard to economic strength and military strength in just one second.
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Okay, so those are two periods to look for.
So what led to World War II?
Kind of something similar that led to World War I. A feeling that, economically speaking, there were rising powers that could challenge the global hegemon, in this case the British Empire, and a feeling that military spending was ahead of its opponents.
And now let's look at the 1970s.
This is the period that Neil Ferguson is talking about.
He says that we're about to repeat the 1970s.
So if you look again at the global chaos that took place in the 1970s, the United States is well ahead of any other country in terms of GDP in 1966.
But because the United States decided that it was going to hamper itself in terms of wide, vast spending on social programs and inflationary policies, it basically undercut itself economically.
So here are the top countries by GDP.
You can see the United States is more than doubling The Soviet Union, which is number two, and in this particular period, the only two countries you really need to watch are the United States and the Soviet Union.
So here, because this is the middle of Cold War, here is the top countries by GDP.
We're going to watch this chart as it goes from 1966 to 1991.
It's really kind of fascinating.
So the United States is still leading the Soviet Union.
In 1967, by a heavy margin, Soviet Union's actually falling behind.
And then you're going to start to see things sort of reverse.
We hit 1970 and suddenly Japan is creeping up.
Japan is starting to drink the United States' milkshake in terms of manufacturing.
The Soviet Union still is stagnating, but you're about to see that change at least a little bit.
The United States is still way ahead, but Japan is starting to gain.
Now Japan is starting to climb above the Soviet Union in terms of economics.
The United States, again, still well ahead.
This is why war did not break out, because nobody has an opportunity.
Okay?
Japan is still gaining.
Japan is still gaining.
The United States, well ahead of everybody else throughout the 1980s.
And this continues all the way up until 1991 when the Soviet Union drops off the map.
In 1991, the Soviet Union basically ceases to exist.
By 1987, the Soviet Union is below the UK, Italy, France, West Germany, in terms of its economic power.
By the end of the Cold War, the Soviet Union, economically speaking, doesn't exist.
Japan is the largest challenger to the United States.
Now, if you go back and you look at the actual military spending during this period, It just shows you why the Soviet Union lost the Cold War.
You can see the economy there.
The Soviet Union was never even a remote challenge for the United States.
Look at their military spending.
The Soviet Union could not afford it.
1966, the United States is outspending the Soviet Union by approximately 15%.
As this ramps up, you're going to see the Soviet Union try to keep up with the United States despite the fact that its economy is nowhere near the economy of the United States.
So here we go.
This is the military spending.
The U.S.
is jumping ahead by the late 60s because of the Vietnam War.
So the United States is spending an awful lot of money in Vietnam at this particular period in time.
Look at the Soviet Union now gaining on the United States as you enter the late 1960s.
And this is going to continue throughout the 1970s to the point where the Soviet Union is actually spending as much as the United States, right?
By 1971, the Soviet Union is now the number one military spender on planet Earth.
This continues for years.
1972, 1973, 1974.
And this is going to continue for years and years and years until you hit the 1980s.
In the 1980s, the United States actually sees the Soviet Union as a wartime threat.
Look how far ahead the Soviet Union is by 1977.
It's spending 50% more on military than the United States is, which is kind of amazing.
Again, considering that the United States economy at this point is a radical Is a radical portion ahead of the Soviet Union in terms of economic spending in terms of GDP.
1981, Reagan comes into office.
You see the United States begin to ramp up their military spending.
United States now challenging the Soviet Union.
We're going to bankrupt the Soviet Union by forcing them to continue to spend more money than they have.
I mean, look at look at how much money they're spending.
They're spending $267 billion, $270 billion.
I mean, by this point, remember, by 1986, The United States has such a great- By 1987, the Soviet Union is spending as much money- 1988, the Soviet Union is spending as much money on the military as the United States is.
And then you can see they can't keep that up, right?
They just collapse.
And that is just an effect of the GDP, right?
The GDP of the Soviet Union could not keep up that spending.
The United States can indefinitely.
And that is why the Soviet Union collapsed.
Their economy could not keep up with the economy of the United States.
And so they had to collapse.
They just never had the economic power to keep up with the United States.
In retrospect, all this looks kind of inevitable.
That wild imbalance between Soviet military spending and Soviet GDP couldn't keep up.
Okay, so now let's look at the current period.
Which of these periods does it look most like?
Does it look like the 1910 period?
Does it look like the 1935 period?
Does it look like the 1966 period?
So here is the global GDP.
These are the countries by GDP starting in about 2007.
So the United States is way out in front, right?
The United States has about $14 trillion in GDP as of 2007.
The number two country is Japan.
As you're going to see, Japan goes into an area of stagnation, it's then Germany and then China. In this particular chart, you're going to want to watch China because China is about $3 trillion in GDP and China continues to be a global threat. You'll see why China is the chief global threat to the United States here. So here is the top countries by GDP as of 2007 and moving forward.
Look at China grow and the United States continues to grow, but slower than China is growing. China is about to overtake Japan in about 2009. Look at China continues to ramp up its economy.
Now it's half the size of the American economy.
By 2014.
By 2015, it's about two-thirds the size of the American economy.
China starts to waver in 2016, 2017, 2018.
But by the time we hit modern day, China's about $14 trillion, the United States about $21 trillion.
waiver in 2016, 2017, 2018.
But by the time we hit modern day, China is about $14 trillion.
The United States about $21 trillion.
The EU, by the way, is about $17 trillion, the combined EU.
So what we have is something that looks a lot closer to parity, economically speaking, than the Russians really ever came to the United States.
But there's a problem.
If we go back to those factors that we were talking about with regard to Neil Ferguson, the challenge with empires, right now there are internal challenges in, for example, the Chinese empire, and internal challenges in the West.
And so the question is going to be whether the United States wishes to repeat the 1960s, 70s, and 80s, which at least has a good outcome because we just out-compete everybody.
Remember, the 1980s did happen.
The 1970s were followed by the 1980s.
So if Neil Ferguson, what he says is right, that we're about to enter the 70s, then maybe we get an 80s coming out the other end of this.
Or is this going to look more like the British Empire circa 1910 or the British Empire circa 1935?
A leading economic power that basically loses its way and gets hollowed out by a competitive power, even if that competitive power, like China, goes down.
Now the problem here is that China Again, they look a lot like Nazi Germany, frankly, not just because they're a fascist state that does human rights predations against its own people, but because China is, to the outward world, a strong state that has internally actually got some very serious problems and they may have to go now, right?
This is the possibility of actual war.
There's a really good piece over at the Carnegie Endowment for International Peace by a guy named Michael Pettis talking about Chinese economy.
It's from April, and he talks about the fact that the Chinese National Bureau of Statistics is releasing GDP numbers that look really bad.
China's GDP numbers are starting to decline.
So you've started to see this radical growth in the same way that you saw German radical GDP growth leading up to World War II, for example.
China had radical GDP growth, but now it looks like they're about to stall out.
And the big problem for China is, again, because they are a state, they look a lot like actually the German national economy.
The German Nazi economy was a state-run form of mercantilism.
Basically, the government worked in concert with corporations in order to push state goals.
That looks exactly like the Chinese economy these days.
And China has extended itself extraordinarily in terms of debt.
China's debt-to-GDP ratio is extraordinarily high.
We are talking about a debt-to-GDP ratio that exceeds 250%.
No one's talking about this sort of stuff because there's so many people in the West who admire the way that China runs its economy because there are a lot of people in the United States who are very much in favor of centralized power over the economy.
But China has a real problem on its hands.
It's about to stall out.
Because they've spent so much money on boondoggle projects.
So what exactly is China going to do?
Well, according to this piece over at Carnegie Endowment for International Peace, there are basically five paths China's economy could take going forward.
One, China can stay on its current path, keep letting large amounts of non-productive investment continue driving the country's debt burden up indefinitely, which means economic stagnation, which means it looks like the Soviet Union in the 80s.
Second, China can reduce the large amount of non-productive investment on which it relies to drive growth and replace it with productive investment in forms like new technology, China can figure out how to actually invest properly, which would mean capitalism, which they're not going to do.
Three, China can reduce the large amount of non-productive investment on which it relies to drive growth and replace it with rising consumption, which would mean privatization of assets, meaning China could allow more of its people to have more money, so they could drive consumption, which would drive innovation.
They're not going to do that, because if they allow for that sort of thing, that could create an actual nascent middle class that's a threat to it politically.
Fourth, China can reduce the large amount of non-productive investment on which it relies to drive growth and replace it with a growing trade surplus.
In other words, drive up manufacturing.
But the problem is that they already have a massive trade surplus.
There's not that much further they can go.
And finally, China can reduce the large amount of non-productive investment on which it relies to drive growth and replace it with nothing.
In other words, stop taking out debt.
In which case, growth would necessarily slow sharply.
Well, if that happens, China is likely to feel that it needs to extend itself in other ways.
And this is what you see when you look at the chart of military spending from about 2007 on.
So here's military spending by country in the period 2007 to 2020.
Look how far out the United States is, right?
And this is what you need to do.
If you are a global hegemon, the way the United States is, the same way that the United Kingdom was circa 1910, you need to spend like the United States is spending right now.
We can talk all we want about Over extension of the United States, we can talk about where we need to have troops.
But the fact is that if you wish to retain global peace with the United States as the as the hegemon without significant war between empires, then you're going to have to have this sort of advantage in terms of the spending.
So look at this chart.
In 2007, the United States is spending literally 10 times its competitors.
Second is the United Kingdom.
Look at China.
So China starts to grow as of 2007-2008.
So China's entire perspective up till that period would be grow our economy, and then we'll do the military spending.
Look how China is ramping up its military spending.
Now, it's not even close to what the United States is spending.
But remember, China is a regional power, not a global power.
So China doesn't need to really challenge the United States as far as spending in, for example, Russia.
Look at the next two powers, China and Russia, right?
Russia is an incredibly weak economy.
China is not nearly as weak.
Look at China ramp that up, right?
China is obviously militaristic.
China obviously is looking for a launching point because they can't keep this up indefinitely.
The great fear for China is that it looks like the Soviet Union in the 1980s, which may force it into the position of Nazi Germany in the 1930s.
Look at China ramp up that military spending.
Now China's spending about one third of what the United States is spending and China does not have to control The United States in Europe.
China doesn't have to control the United States when it comes to Africa, for example, or the Middle East.
China just has to control the area around it and expand that that certain circle of power.
So this is why people like Neil Ferguson are deeply worried, not just that we are heading into the 1970s, but that China could make a move on Taiwan because they basically have no choice but to do so.
Meanwhile, Russia is doing the same thing.
So if you're talking about a time of collapsing empires, Russia is extraordinarily economically weak.
Russia is spending a lot of money on its military because Russia has no money for anything else.
And that is why Russia right now has to win in Ukraine.
Russia has to ramp up the energy crisis in Europe, which is why they just closed down the Nord Stream 2 pipeline.
They have to come up with some sort of victory in Ukraine.
So we are right now at a real inflection point.
This does not mean, by the way, that the West has to give up.
The West could have a 1980s.
The question is whether the West is going to have a 1980s or whether it's going to have a 1910s or 1930s.
This is true for all these countries.
Is China going to look like Germany in the 1930s, or is it going to look like Soviet Union in the 1980s?
Is the United States, Britain, Europe, are they going to look like Britain and Europe leading up to World War I, World War II, where they ramped down the military spending, where they have a lot of internal hesitancy?
Or are they going to look like the United States did in the 1980s, in which they ramp up the economy and ramp up their military power?
That is a binary choice.
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Okay, so we've looked at all of these historical periods, where we are, if history repeats itself, because they're comps, right?
I mean, these are comparisons, so we have to see kind of what comes next.
If you are the West, there are two ways in which you endanger yourself.
One is that you internally weaken yourself And the other, morally, and the other is you internally weaken yourself in terms of policy.
And so you saw both of these happen with the British Empire, right?
If the United States' best comp is the British Empire, because the last major empire that had this sort of global reach and span was the British Empire, then you have to look back at history and see why Britain lost control of its global empire.
And there are a bunch of reasons.
One, obviously, is that the idea was that the British Empire was overextended.
But part of it was a feeling that had set in, even by the late 19th century, that Britain was losing its way morally, that it had lost its sort of feeling of, we deserve to have a global leadership role.
Rudyard Kipling, of course, much hated by the left.
He had a very famous poem from 1897 called Recessional.
Neil Ferguson cites Recessional as Rudyard Kipling's best poem.
And here it is, and it sort of speaks, I think, to where we are in the United States today.
Because if we're talking about how we stand up to global challenges, whether we maintain our global position, we have to think about what sort of values we wish to promulgate.
And this is a very serious question.
This is why people on the right who have been pointing out that woking the military is a bad idea, or that the social values promoted by the elite class in this country are not in consonance with traditional American values, they are not wrong.
And this has real ramifications for the rest of the globe.
It turns out that promoting constitutional rights and promoting Judeo-Christian values is not necessarily a bad thing.
That's not imperialism, that might just be decency.
And if you lose that feeling, then what you're going to end up doing is destroying yourself.
Here's Rudyard Kipling's poem, Recessional, from 1897, and it sort of speaks to this.
It says, God of our fathers, known of old, Lord of our far-flung battle line, beneath whose awful hand we hold dominion over palm and pine, Lord God of hosts, be with us yet, lest we forget, lest we forget.
Fire called, our navies melt away on dune and headland sinks the fire.
Low, all our pomp of yesterday is one with Nineveh and Tyre.
Judge of the nations, spare us yet, lest we forget.
Lest we forget.
For heathen heart that puts her trust in reeking tube and iron shard, all valiant dust that builds on dust and guarding, calls not thee to guard.
For frantic boast and foolish word, thy mercy on thy people, Lord.
So, again, that's a shortened version of the poem.
I skipped a couple of stanzas there.
It's a little long.
But the basic idea is when you forget God, when you forget your values, then, and you rely simply on material power, you are likely to collapse, which is, of course, what happened to the British Empire over the course of the next half century.
And in material terms, what you end up with is a moral collapse followed by an actual material collapse.
Fast forward.
to 1969 and Philip Larkin has another poem called Homage to the Government and it speaks so much to what the United States is facing right now.
Quote, next year we're all to bring the soldiers home for lack of money and it is all right.
Places they guarded or kept orderly must guard themselves and keep themselves orderly.
We want the money for ourselves at home instead of working and this is all right.
It's hard to say who wanted it to happen, but now it's been decided.
Nobody minds.
The places are a long way off not here, which is alright.
And from what we hear, the soldiers there only made trouble happen.
Next year, we shall be easier in our minds.
Next year, we shall be living in a country that brought its soldiers home for lack of money.
The statues will be standing in the same tree-muffled squares and look nearly the same.
Our children will not know it's a different country.
All we can hope to leave them now is money.
So you fast forward about 70 years and there's a direct correlation between loss of the values that Rudyard Kipling is talking about in 1897, for better or for worse, and Philip Larkin talking in the 1960s about how Britain had lost its empire because it had decided to look inward.
So what exactly is the United States going to do?
What is the choice?
The choice is either you see yourselves in a competitive race with other countries for global dominion, And that doesn't mean you have to own other countries, but it does mean that if you wish to retain your strength at home and not have to face down the possibility of a rising empire like China, then you'd best strengthen yourself.
Or you can weaken yourself, both morally and economically.
You can weaken yourself through welfare statism, the way that Philip Larkin is talking about, or you can weaken yourself morally, the way Rudyard Kipling is talking about, and you can look to your own material prosperity, which eventually degrades into this soft form of democratic social democracy that you see in Europe.
It's pretty clear which way Joe Biden wants to go.
The way that Joe Biden wants to go is he wishes to degrade us at home, both morally and economically.
And this is a major, major problem.
And this is leading to significant conflict inside the United States.
So, for example, yesterday, Joe Biden had a tweet, and it seems like a small thing, but it's not.
Joe Biden was tweeting out, obviously he's targeting the so-called MAGA Republicans.
By MAGA Republicans, these people who he labeled last week, threats to democracy, right?
The real threat is not China.
The real threat is not Iran.
The real threat is not Russia.
The real threat is you, if you're a person who disagrees with him.
And when I say, if you're a person who disagrees with him, I really mean that.
Joe Biden has labeled people who disagree with him MAGA Republicans, and then he has labeled MAGA Republicans semi-fascists who are a threat to democracy.
He did that last week in one of the worst speeches I've ever seen by an American president.
So he tweeted out yesterday, because yesterday was Labor Day, quote, We understand something that MAGA Republicans in Congress don't.
Wall Street didn't build this country.
Working people did.
Now this seems like silly pablum, right?
I mean, it seems like, okay, fine.
He's just doing his Bernie Sanders routine.
But understand what he's actually doing in this tweet.
He's doing a couple of things.
One, he's labeling half of Americans the enemy.
And two, and that has nothing to do with Trump, right?
What makes you a mad Republican is apparently you think that Wall Street is important.
And two, he's undermining Wall Street.
Now, there are a lot of problems with Wall Street dependency on Washington, but let's get one thing straight on an economic level.
Capital markets make countries strong.
If you look back at that entire history of charts that I just showed you, the countries with the strongest capital markets dominate.
Dominate.
Britain had the strongest capital markets leading up to World War I, and even between World War I and World War II, the two strongest capital markets on planet Earth were in London and New York.
Those were the strongest capital markets.
Pretending otherwise is stupid.
Every country has labor.
And when Joe Biden says Wall Street didn't build this country, working people did, that's just idiocy.
I'm sorry.
There's a combination of Wall Street investment and working people.
You can't have one without the other.
Labor without Wall Street means nothing.
Wall Street without labor also means nothing.
But to pretend that capital markets are not a massive factor, and indeed, the key driving factor behind the growth of an economy, is unbelievable stupidity.
And to label people who actually understand economics the enemy of the country, which is effectively what he's doing when he says they are MAGA Republicans, It's ridiculous.
Now you can treat that as normal political rhetoric.
But the fact is, if you wish to see a strong America, in terms of economics, which means a strong America capable of doing what the United States, even if you're an isolationist, capable of doing what the United States did during World War I and World War II, on those charts, where suddenly you see America's economic might transformed into military might, boom, you see that chart?
Where it just explodes, America's military might.
If you're ripping on Wall Street, the capital markets, the possibility of innovation and investment, of course you're undermining the strength of the country, which is what Joe Biden is doing right there.
His agenda is the Philip Larkin agenda.
Bring the money home, redistribute it, and don't grow.
Well, there are real threats to that, international threats to that.
We'll get to that in just a minute.
There's more show that's coming.
You're not going to want to miss it.
We're going to talk about the Biden attempt to undermine America's strength, economically speaking, and yes, militarily speaking.
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