China Isn’t Rising; They Are Already There

We keep our eyes on the Chinese market. It has performed horribly over the past several months.
ASHR Chart

ASHR data by YCharts

You have to wonder if losing all that wealth will bring different kinds of stresses into the China. Their culture handles failure a lot different than western culture. It’s not just the Chinese that are stumbling. Over the past 8 years I believe western economies have built their own mousetrap and it’s starting to show itself.  I bring this up because I read a super interesting article in The Atlantic. The Thucydides Trap: Are the U.S. and China Headed for War? One of the things we try and do at the National World War Two Museum is explain how the war got started in the first place. What can we learn so we can avoid it again in the future?

People have huge misconceptions about WW2. Most people will talk to will tell you that the war brought us out of the Depression.  But, they don’t understand what got us into the Depression.  It was really bad government policy.  War didn’t get us out of anything.  The opportunity cost of the war was huge, and outweighed the cost of fighting it.  Imagine if all those lives were not lost.  Imagine if all those resources that were put into military equipment were diverted into something that had economic value.  Looking back isn’t about framing the war in accounting terms to calculate the cost/benefit of the Lend Lease Act.

The article I linked to looks at historical times when a new world power rose, and tried to co-exist with an established world power.  12 out of 16 times (75%), it ended in a war which was not good for either.  Once shots are fired, it’s impossible to predict with any certainty what will happen.

The University of Illinois in Champaign has a very very large population of students from China and other countries.  In an obtuse way, the state of Illinois economic problems have caused a change in behavior at our largest state university.  In order to cover costs, they have had to admit more international students than ever.  Many people in Illinois are upset about this.  When I go lecture there and walk down the quad, sometimes I never hear English spoken.  It’s a mix of Asian and Eastern European languages.  We can turn that economic problem into an asset if we work at it.  We have a golden opportunity to form relationships and get to know each other.  Building those relationships now could help us later.

Selfishly, I’d like to actively integrate that international population into the Chicago startup community because I believe it will be a benefit to everyone.  The first step is just showing up.

It is good that President Obama is talking to the Chinese President.  I didn’t like Governor Scott Walker’s stance about canceling the trip.  There is much to talk about.  China is a very different place than the US.  It is imperative that we understand them.  It’s also imperative that they understand us.  It’s a relationship that has to be actively managed so that we can avoid the traps that would lead us to a military confrontation.  China is already flexing its military muscles.  They are a threat to places friendly to the US; like Japan, Taiwan and Singapore.  Just like Sparta and Greece in Thucydides age, there are all kinds of mines waiting to explode.