The Nightmare Scenario: Are We Paying For The Rope That Will Be Used To Hang Us?

Let's say you were running a country with a huge population but a primitive infrastructure. For historical reasons, your population was not well-educated and your country was not industrialized; manual labor predominated. Your political-economic system provided security for the ruling elite and a docile populace, but the fundamentals of your economy could only change if you obtained money from other countries. More important to you as a leader, you believed your country was not treated with the respect it deserved given its historical accomplishments. How would you address these problems?

Let's say you realized that, although your economy was aligned with socialist principles, you were enough of a realist to realize that economic capitalism was the best way to bring prosperity and technical advancement to your country. So, you decide to utilize capitalism by exploiting your greatest resource; your people.

Fast forward a dozen years. Your country's factories produce durable goods for the world. Because you don't enforce intellectual property laws, much of what you value from other countries is used without compensation in your country... software, entertainment. You even turn a blind eye to the illegal copying of this, because it brings in hard currency. But all isn't rosy.

You realize that you need to not repeat the mistakes of countries like Japan, or England, Germany, or even the Unites States... manufacturing powerhouses who failed to control the natural resources that they depended on to keep their economies afloat. So, you bribe corrupt leaders of resource-rich but poor countries elsewhere in the Third World so you can develop and control their resources. You give guns and money to the Sudanese regardless of their deeds in Darfur, so you can get the oil you need. You do the same things in Nigeria and Angola. You go elsewhere in Africa, sending your people over to oversee the natives in places like South Africa and Zimbabwe. Like a drug pusher, you give poor nations cheap loans so they become beholden to you. You dump consumer goods in their markets, squeeze out the local competition for textiles, and you set up companies for these markets using mostly Chinese labor. In short, like the European powers you practice colonialism, but unlike your antecedents you have no religious or moral sentiments to make lives better for those you exploit, and you have no plans to leave. You don't stop in Africa, either. Iran and Venezuela need a friend who can sell them weapons, and you need oil. It's just business.

How do you handle your largest competitor, the Unites States? Well, you buy their debt so they can become beholden to you also. You give weapons technologies to proxies like Iran, Pakistan, and North Korea, so that America has to spend its time trying to do something about proliferation... and each time its efforts fail American prestige suffers another blow. The Islamists leave you alone, because unlike the Americans you really don't care about world opinion, and they know it. Not that you can project power... yet... but you've ensured that countries like Iran understand that it is in their interests to be aligned with you, to sell you oil and buy your technology, while they rail against the West. You don't care if the Islamists want to fight with the Americans. It only weakens both, and that benefits you. You don't care if the North Koreans or the Iranians get the Bomb. They won't use it against you, and it only weakens America.

So, here we are in 2009. China holds almost $2 trillion in US debt, in the form of treasury bonds. Foolishly, we have borrowed money from them to buy from them. And, we are counting on them to buy another couple trillion over the next few years. What happens when China calls in that debt? Or, even worse, what happens when China decides on a course of action that we find objectionable, and their response to our objection is to threaten to destroy our economy? Will we fight for Taiwan, for instance, if the cost of doing so makes our current economic woes seem like a bank holiday?

I don't think we've woken up to the fact that we are currently losing an economic war with China, and if we don't change course quickly we are going to be destroyed as a country. The evidence is there; all one has to do is to look at the contrast between Detroit and Shanghai, and to realize that the money that used to support America's industrial areas (the Rust Belt) has been sent overseas and has built China's shining cities and manufacturing facilities. It's not China's fault, of course. We gave them the opportunity by deliberately choosing to be non-competitive, and they have capitalized on our stupidity. And we're continuing down this road, further stifling our competitiveness because of shortsighted policy decisions. Americans were naive enough to believe that economic prosperity and political freedom had to go hand-in-hand, but that isn't necessarily true in a modern industrial society. Unlike us, the people who govern China don't have to worry about fractious political battles, and unlike us they have learned from their past policy mistakes.

Look ahead a few years. China is preparing a blue water navy, and there's only one reason a country needs a blue water navy: projection of power. China is working on a ballistic missile 'carrier killer' to deal with our blue water navy. China understands the latest GPS and computer technology, because they manufacture it for us, so there's no smart weapon in our arsenal they can't build. And China will have 32 million military-age men for whom there are no Chinese women, so these men will not be able to marry in their own society. All of these things will come to a head at the time we finally run out of money because China can choose when it will stop financing our debt... and then we are broke.

That is the nightmare scenario, the game of Risk in the real world: a China that has sewn up its natural resource needs, that has built a powerful military, and that has brought our economy to a halt. What if they go into Siberia? Only we could possibly stop them, and I don't think the American people will accept the risk of a nuclear strike against an American city to do so. The Russians don't have the population or the military to stand against them, even with nukes. Once China gets Siberia and has a few years of rest to rebuild what they lost in the Sino-Siberian War, who will be next?