Dwarkesh Patel: belief

Transcript context

…so forth. But there is also a legitimate question to be made about how China now accounts for 20% of the global economy, probably larger in the future, and a third of the global manufacturing economy. There has to be an agreed set of rules about how it interacts with the rest of the world so that everyone feels that they are benefiting, not just in financial terms. We don't really have that agreement now. Two points. On the political system, I wonder if we've learned a bad example from World War II and the Cold War, which is that great power conflict culminates in the other party totally collapsing. I think that was actually necessary, obviously, for Hitler and even for the Soviet Union. I think they were evil regimes. I think China today is an evil regime in a way, but it's just not in the same tier as Stalin or Hitler. So the end state for any great power competition for America… History is long, there will be more than just these next few decades. It cannot be that if there's a different political system that it has to collapse the way that the Soviet Union collapsed or that Hitler collapsed. The first thing to note here is that this could be true of any country. I think people conflate these two arguments. Whereas it's worth noticing that if Australia was producing everything the world consumed and had an economy the size of America's, these arguments should apply to them as well. I don't think people have the sense of if Australia were producing a bunch of stuff for us, we would need to form a coalition against them and have this adversarial attitude. But suppose we did. There's a question of, “How could you prevent this dislocation and is it Australia's fault?” The analogy is breaking down. Let me just go back to China. So there's low value-added manufacturing where labor cost is a big fraction of cost. That kind of stuff was shipped off to China. But if it wasn't for China, there's many other countries in the world that have much lower labor costs than the US. If it wasn't for China, it'd be like Vietnam or Bangladesh or something. Then there's high tech manufacturing. There I haven't crunched the numbers, but if I were to guess, I don't think with TSMC's leading-edge 5 nanometer wafer, I doubt very little of what it costs to make that is the process engineers themselves. That is just a question of, “Can your country produce it?” There's a few different questions in there, so let me break that down. The first thing that you alluded to there. Essentially, is a Cold War the right framing for whatever this conflict is with China? My answer to that is absolutely not. You can address that question both empirically and conceptually. Empirically, if you just look at patterns of trade and investment during the Cold War, the Soviet Union never accounted for more than about 1% of US trade and investment flows were basically non-existent. China at its peak about 10 years ago accounted for 17% of US trade, about the same amount as Japan did in the late 80s and early 90s. That number has come down a little bit on the surface. But when you take account of stuff from China coming in through third countries and so forth, basically that remains the same. If you talk about investment flows, there's $600 billion or more of US corporate investment in China. That generates huge amounts of sales, much larger than US exports to China. The integration of the two economies is just extraordinary. There's basically no precedent for it at any point in economic history. It is just a completely different order of magnitude to what was going on during the Cold War. So one question would be, “Okay, if you really want a Cold War, does that mean that what you want to do is you want to reduce those trade and investment flows back down to essentially zero? If so, how do you do that?” That's a very difficult problem. You got at the more core conceptual issue, which is, how does this end? This does not end by China going away or turning into something completely different. It's too big. It is too successful. The economic model is successful on its own terms. It has a lot of problems, but it's fundamentally successful. It is deeply integrated with the entire global economy in ways that are beneficial for China and beneficial for most of the other countries in the world. Everyone has some sort of a stake in China continuing to succeed. This is just not going to go away. There’s another sense in which it's not going to go away. Let's say you could wave a magic wand and make the CCP disappear tomorrow and replace it with something else. What would that something else look like? If that something else were to be successful at governing China, it would almost certainly share many of the characteristics of the Chinese Communist Party. It would have a strong determination for China to be an independent geopolitical actor, taking care of its own security with a very strong military so that it could defend itself against all of its real and perceived security threats. It would be committed—as every Chinese government since the mid 19th century has been—to maximizing the rate of technological progress and making sure that as much as possible of China's core technology needs were met by domestic production rather than imports. It would be very, very similar to what we have today.…

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