My friend Lyric Hughes Hale opened her recent missive with this thought provoking paragraph:
At the twilight of the Cold War in the 1980’s, historian John Gaddis described The Long Peace, predicting that we had entered a new era of tranquility due to the stability of the postwar international system. Almost forty years later, and in the eighty years since World War II, no major powers have directly battled each other, although China and India have had their skirmishes.
Will this period of peace and prosperity endure?
Lyric asks a profound question. She writes with precision and articulates the issue so well that I asked her for permission to share it with our readers instead of publishing my own draft on this question. That is a temporary delay on my part.
We are seeing this question arise in conversations in many places and in various forms. Neil Howe has one approach in his new book. Ray Dalio has raised it in another form. I will have some commentary about it my forthcoming book. John Mauldin raised a similar question in his newsletter. The list of examinations into existential risk and strategic inflection points is growing. The list of those examining the question is impressive, not to say daunting. In my opinion, Lyric ranks among the most thoughtful observers and delves deeply into the issue.
Her Substack column is read by me on receipt. Her econvue insights are helpful and well researched. Here’s the link for a reader to find them: https://substack.com/@halereport?utm_source=substack&utm_medium=email.
I asked Lyric if we could reproduce her entire essay as a guest commentary for our readers. She was kind enough to say yes. So, you will find the entire piece below. Readers can see why I am an enthusiastic supporter and consumer of her research and writings.
-David
Will the Long Peace Endure?
Or will regional conflicts coalesce?
By Lyric Hughes Hale
Oct. 23, 2023
At the twilight of the Cold War in the 1980’s, historian John Gaddis described The Long Peace, predicting that we had entered a new era of tranquility due to the stability of the postwar international system. Almost forty years later, and in the eighty years since World War II, no major powers have directly battled each other, although China and India have had their skirmishes. Will this time of peace and prosperity endure?
The Changing Contours of Conflict
In the postwar period the US has however fought a continuous string of largely unsuccessful and tragic proxy wars. In spite of bloody regional conflicts, combatant and civilian war casualties have plummeted as a percentage of population. A world war is a totally different and destructive animal — for a short but amazing data animation watch: The Fallen of World War II.
Expectations of Conflict: Public Opinion & Historical Trends
Anticipation of conflict, like inflation expectations, can have an impact on both citizens and leaders. I believe, admitting the absence of any reliable survey, that the majority of Chinese expect to engage in a war with the US at some point. In a controlled media environment, this messaging might simply be a way to distract people from economic policy failures, rather than revealing the intention of leadership.
By contrast, Americans have grown less enthusiastic about engaging with other countries. A recent Chicago Council on Foreign Relations survey shows:
About six in 10 Americans think the US should play an active role in world affairs (57%, 42% stay out of world affairs). This reading reflects a steady decline since 2018 (when 70% favored an active role) and is among the lowest levels recorded since 1974.
This isolationist trend might represent the backlash of so many negative post-war engagements. Is our number up, as some have suggested — are we “overdue” for a catastrophic world war? Data scientist Aaron Clauset at the University of Colorado says there is nothing unusual nor transitory about the long postwar peace:
The models indicate that the post-war pattern of peace would need to endure at least another 100–140 years to become a statistically significant trend.
This type of work by data scientists, aimed at uncovering historical trends, is exciting, offering illumination during the fog of war. Here is an even longer view of human conflict from Our World in Data.
Global Contagion: Connecting Regional Conflicts
For a short while this summer the world seemed to be calming down, especially in the critical US-China relationship. A series of high-level visits after a lag of four years, and statements from various levels of the Chinese government welcoming investment and protecting private enterprise, all seemed to be going in the right direction. More recently, a US Congressional delegation was quite direct with Xi Jinping over his lack of support for Israeli victims of the Hamas attacks, and China responded thoughtfully and constructively. Could unfolding events in Ukraine and Israel upend recent progress in US-China relations?
A few months ago, I had a bad leak in the ceiling of my upstairs hallway. The contractor was called, drywall was sawed out and replaced, and all seemed well after cleaning up the mess. Then a few days ago, on the other side of the hallway after a downpour, water began to drip from a skylight. Waiting for the roofer to arrive, I watched to see if the old leak would reappear and both leaks meet in the middle. Sure enough, that is what happened. As my carpenter told me, water will always find its way to the lowest point, when the structure is flawed. Our international structures are also failing.
Events that connect the battle lines of the Ukraine War, the Middle East, and China are what I worry about most. The ongoing regional conflicts in Ukraine and the Middle East, and growing tensions in the Taiwan Strait have left many people with a fear that these events could somehow become linked into a single conflagration. The sheer number of planes aloft and ships afloat around the world is daunting. What could go wrong? Here is one example that links risks on three continents:
Credit: Jerzy Nowak @MarineTraffic.com (used with permission)
A Norwegian Navy ship shadowed a Chinese container ship investigated over damage to a gas pipeline in the Gulf of Finland for about 15 hours as it sailed along the western coast of Norway on Monday, vessel tracking data showed.
Finnish investigators on Tuesday said they were looking into the Chinese vessel, the NewNew Polar Bear, and a Russian-flagged ship, the Sevmorput, as well as other vessels, present in the area when a Baltic Sea pipeline was damaged on Oct. 8. They said the incident was due to "outside activity" and could have been deliberate.
The pipeline damage occurred on October 8th. According to Marine Traffic, the NewNew Polar Bear, flying under the flag of Hong Kong, arrived this weekend in the Russian port of Arkhangelsk. The matter is still under investigation.
The US & China: Increased Military Presence in the Middle East
The US of course is increasing its military presence in the Middle East. General Lloyd Austin announced a major deployment of forces to support Israel. He also said on Sunday morning news shows that he is concerned about the “prospect of a significant escalation of attacks on our troops and our people throughout the region”.
At the same time China is more visible in the Middle East, where it also has clear interests. Its diplomatic efforts to broker peace deals between former enemies have not met with success. While calling for a ceasefire in Gaza, China has steadily increased its force posture in the Middle East as well. According to the India-based Eurasian Times, six Chinese naval warships have been operating in Middle East over the past week. “After successfully concluding its visit to Oman, the 44th Chinese naval escort task force arrived at Shuwaikh Port, Kuwait, as planned, on the morning of October 18, for a five-day goodwill visit.”
Obviously, if Iran gets directly involved in the Israel-Gaza war, the effects on energy prices and the global economy, including China could be devastating. Here it seems common interests are paramount.
Potential for US-China Conflict in the Pacific
China’s position on its interests in Taiwan is even clearer. But its increased incursions in the Taiwan Strait are another way in which the desire to decrease certain risks actually increase others. A serious incident in the South China Sea could also escalate US-China tensions. Some encounters have been only fifty feet away, which is inside the margin of error.
The DOD today released a collection of declassified images and videos depicting 15 recent cases of coercive and risky operational behavior by the PLA against U.S. aircraft operating lawfully in international airspace in the East and South China Sea regions. @duandang
US Department of Defense
Diplomacy on the Ropes
The first line of defense against hostile powers should be diplomatic, led by the State Department. This line is crumbling. The highly public resignation of Josh Paul, a senior official, and rumors that a dissent cable over Biden and Blinken’s policy choices to supply weapons to Israel will doubtless become public and betray what some are calling “near mutiny”. A divided State Department will be ill-equipped to deal with a crisis such as a skirmish in the South China Sea. It is unbelievable that at this moment we do not even have an ambassador to Israel—and many other countries.
China’s Ministry of Foreign Affairs has had its share of internal conflict, including the disappearance of former Foreign Minister Qin Gang. The real head of foreign affairs is of course Xi Jinping himself.
Technology, Interconnectivity, and Trade
The Ukraine War has not widened to include other countries except in terms of material support. That is different to what is going on in Israel and Gaza, where US and European forces could become more directly involved, and possibly clash with Iran.
There are other concerning trends. Technology makes widespread destruction and asymmetrical warfare cheaper, more terrifying, and prone to accident. Thanks to globalization, we are far more connected than we were prior to 1939. In many ways, our lives literally depend upon each other, making trade a weapon of war. Although Chinese officials are touting technology ties and encouraging investments by foreign tech firms, the reality on the ground is that the ongoing anti-corruption campaign is negatively affecting these firms as well, negatively affecting US-China relations.
Apple for example is a major investor in China, and over the past week one of its major suppliers, Taiwan-based Foxconn, has been placed under investigation. I have also seen reports in the Chinese media that Apple resellers have been similarly treated. Since these companies contribute to domestic employment, an enormous issue in China today, one has to wonder if this is a case where local politics and fiscal deficits have overridden national policy goals. Nevertheless, the impact is international.
Unique Historical Context: Israel & Gaza
Another way the conflict could widen is through anti- Israeli violence targeting a worldwide diaspora. The city with the largest number of Jewish people is not in Israel, it is New York. Chicago in fact in #5, just after Tel Aviv. The many pro-Palestinian demonstrations in cities throughout the world must have surprised even Hamas. How could this affect foreign policy in Europe?
What are the Odds of a World War?
Having studied the buildup to World War II in the Pacific, it seems to me that we now find ourselves in a similar situation, fighting wars on many fronts. A combination of accident and personality, stubbornness and pride, all in the name of nationalism led to the death of millions of people during the last world war. Sadly, we don’t have the A-team working on foreign affairs in the two key powers, China and the US, due to domestic political conflict.
The Chinese Communist Party acts as a rigid exoskeleton that envelopes China’s entire body politic, hindering growth, while in the United States, the two major political parties have lost their backbone and are flailing about like jellyfish, unable to choose even a Speaker of the House. Aid bills tied to Ukraine and Israel are paralyzing the normal workings of American government. It is Congress, not the Executive Branch that is authorized to declare and fund wars, so this is also about the balance of power in the US.
In the meantime, the military presence of both China and the US is increasing throughout the world, which could lead to accidental engagements against a backdrop of diplomatic weakness in both countries. Technology could fail us as well, and weaponizing trade could weaken the global economy. Finally, the modern history of the Jewish people makes the current war in Gaza a cause celebre whose impact goes far beyond our borders.
So although it is not necessarily “time” for another World War, worsening regional and domestic conflicts could coalesce to make create one. Data scientist Aaron Clauset was asked, what are the odds of WW3? "Not small," Clauset says, “though the number of unknowable variables about the future make it difficult to forecast with any confidence.” In short, no one really knows.
David R. Kotok
Co-Founder & Chief Investment Officer
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