Graham Allison on the Risks of a US-China War

28:38This is my cousin, Kaiser Wilhelm. Literally his cousin. Literally his cousin. They go on vacation together in the summer. And he says, but every time I read anything, every time I see anything, everybody is blaming them for everything. Why is this? And Crow explains to him, the seashell is shifting. And as the seashell shifts, everybody's perspective is impacted and they exaggerate. And this is kind of like normal. And I think if you look at that Athens-Sparta story, you can find a very similar thing. The Athenians are doing what they're doing. and the Spartans are talking to each other. These guys are hopeless.

29:16Look and see what they do. Every day they get up and they think of some other thing to be vicious. Just real quickly, if we zoom forward to World War II, in that scenario, is the U.S. the rising power that Hitler was completely anxious about? Is that how you fit it into that story? I would say the World War II case is a complicated one, but a good question, where Hitler is attempting to become a rising power in a situation that's already stabilized. But then he has actually such territory. In most of the cases, the rising powers don't have great territorial or imperial aspirations. In the Cold War, in the Soviet Union, I mean, the Soviet Union did really believe in their ideology that every country should be ruled by a communist government and that they needed to have a continuous expansion in order to basically legitimize their own rule.

30:17Fortunately, most of those cases don't have that.

30:36Support for the show comes from Public.com. You're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic option plays on the side. The point is you're engaged with your investments and Public gets that. That's why they built an investing platform for those who take it seriously. On Public, you can put together a multi-asset portfolio for the long haul. Stocks, bonds, options, crypto, it's all there. plus an industry-leading 3.6 % APY high-yield cash account. Switch to the platform built for those who take investing seriously.

31:09Go to public.com slash market and earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com slash market. Paid for by Public Investing. All investing involves the risk of loss, including loss of principal. Brokered services for U.S.-listed registered securities, options, and bonds and a self-directed account are offered by Public Investing, Inc., member FINRA and SIPC. Crypto trading provided by XeroHash. Complete disclosures available at public.com slash disclosures. The Chase Inc. Business Premier card is made for business owners who make things happen. Designed for high spend and limitless cash back, Inc.

31:43Business Premier is a painful card with built-in flexibility. Get the buying power you need to make large purchases, cover unexpected expenses, and help your business grow. Earn a total of 2.5 % cash back on every purchase of$5 ,000 or more. Plus, earn unlimited 2 % cash back on every other purchase, giving you unlimited earned potential to invest cash back into your business, from innovation and technology to everyday expenses. Inc. Business Premier is the only business credit card with 2.5 % cash back on every purchase of$5 ,000 or more, and is part of a suite of credit cards from Chase for Business, designed to meet your needs every step along the way.

32:21Learn more at chase.com forward slash business card. Chase for business. Make more of what's yours. Accounts subject to credit approval. Restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank and a member FDIC. Did my card go through? Oh, no. Your small business depends on its internet. So switch to Verizon Business. And you could get LTE business internet starting at$39 a month when paired with select business mobile plans. That's unlimited data for unlimited business. There we go. Get the internet you need at the price you want. Verizon Business. Starting price for LTE business internet, 25 megabits per second unlimited data plan with select Verizon Business smartphone plan savings.

33:03Terms apply. How much of the current tension between the U.S. and China, tension, discomfort, discombobulation, how much of that is down to China rising as a power versus the U.S. declining as a power? I would say in the good question. So in China's meta-narrative, you ask Xi Jinping or when they're talking, it's the inexorable rise of China. So they're as confident and he's as confident that they're rising into what will be a Chinese century, as Teddy Roosevelt was, if you take the equivalent period in American history. But the other component of this, which was not part of Teddy Roosevelt's, was that the U.S.

33:53is irreversibly declining. That's what she believes. That's what she believes. And the person who works for him, who's his number four and his closest ideological person, is Juan Houni. I've, by some accident and good fortune, have become one of the people whom they enjoy talking to. I think mainly because Kissinger, I'm, you know, was his mentor or mentee and because I introduced them to Thucydides. I mean, as what I said, I was the best publicity agent for an author anybody ever had in China because they've sold more copies of Thucydides' Peloponnesian War in Mandarin since my book than in the previous 2 ,000 years.

34:44So in any case, Wan-Hu Ning is a serious thinker. He was a political scientist originally. He came to the U.S. in 1989 on an American Political Science Association fellowship or something to study at the university or to be a fellow at the university. And then he traveled all around the U.S. And he wrote a book that's called America Against America. And you could go – and it's in English. you can see the English copy. And as the analysis of the factors that were going to splinter the country, it's pretty good for the time, pretty gottful. And they clearly continue thinking about that. I was there just before the Trump-Xi summit in Korea, talking again to a couple of people in the first circle.

35:38And they were saying about the U.S., you know, the U.S., I mean, here's one guy. He said, he was just stranger than we thought. I said, what's strange? He said, well, let me just, let me give you just, just start down the list. He says, New York is the city, is the largest Jewish population in the world. And they're going to elect a Muslim mayor? New York City is the epicenter of global capitalism. They're going to elect somebody who's a socialist? We're socialists. The U.S. is, the government is providing food for one in nine people in the U.S.? And now they're talking about withholding it? We used to do that, you know, when we had people who were poor.

36:38But we think that's one of our great achievements. We don't hand out food and people have food. The U.S. is sending troops to cities. We remember Tiananmen. Is this like Tiananmen? I said, no, this is not like Tiananmen. So the division of income has now become so great. They said, we saw this data that two-thirds of the consumption is now by the top 20 % of the income earners. Well, excuse me. In most societies, the people who were being left out would riot. You know, that would be – that's probably why we say we have to be a modern socialist state because we have to – so, you know, they go on down the list like that.

37:27I said, well, what you have to remember is this is a strange country. It absolutely is. A land of contradictions. A land of contradictions. I sometimes say a kaleidoscope of contradictions. Yeah, kaleidoscope. Because every time you move it, it's another one. On the other hand, it's been remarkably resilient and no other society with no other governing system has been as successful over so long a period of time as this one. And then I usually do my lines about God looks after drunk little children in the USA. But I would say a reasonable person could look at the country today and say, this looks pretty strange.

38:03Yeah. So obviously, there are the big structural questions that will last for a long time, both China's economic rise, U.S. internal tensions, etc. But this year in particular, Tracy started the episode with all these headlines, and that's daily. And Trump himself is, you know, there's the contradictions within the White House, etc. But just the events of this year, had they from today, from January 1st to today or from the inauguration to today, have your views changed? Are you more optimistic, less optimistic? Like, what have you learned in 2025? That's a good question. So I would say two-thirds or 80 % of the story is baked into the structure.

38:44Yeah. So if and as China continues rising, which I believe it will, and growing at about twice the rate we do, which I think it will, and advancing in technologies the way it has been, which I think it will, even though it has many, many, many, many, many problems. But I think they'll manage more or less on that path. And Americans will wake up more and more every day that China's in your face doing something or whatever. So that's point one. Point two, in this lucidity and rivalry, again, it's natural for the ruling power to blame the rising power for everything. And blaming China or hyping China threat or demonizing China is kind of normal.

39:26And I would say the Spartans were demonizing the Athenians, maybe not quite to the extent. So for Americans, we do it our way, but I would say that part is right. So those are the negative components. While it may seem strange, especially in Cambridge, for somebody to look for some signs of hope or silver linings in Trump, I think Trump understands that nuclear war would be catastrophic and really, really worries about that in a way that the only other person in the foreign policy establishment equivalent lately that has done that was Biden, not Obama, not, you know, 80 percent of the others. So that's number one.

40:09More he understands very, very bit. Secondly, he somehow, he has this respect for Xi. He admires China. Some of what he admires is their autocratic rule. He says, how in the world did you manage to rule 1.5 billion people with so little objection? I wish I could manage my press the way you do, blah, blah, blah. You've got a lease on life. I mean, he's a leader for life. Is anybody any suggestions for me? So he admires that. He wants to be a great peacemaker. So I think it's not inconceivable that we might come to have a strategic concept that would be something like a partnership, which would then balance, I think, will the Thucydide rivalry continue in every case?

40:59Yes, I believe it will. And will it mean that this feeds of fear and all the things that will be normal? But if it's also the case that my survival as a country depends on a degree of cooperation with you so that we don't have a nuclear war, because at the end of a nuclear war, my country's gone. So that AI doesn't end up ruling us all. We're the two AI leaders, so could we find some financial system? In 2008, we would have had the financial crisis would have become a depression had it not been for a joint U.S.-China statement. Oh, trade. I mean, if we look at the rare earth story, I mean, that's what those are there.

41:40Oh, yeah. I was fiddling with this piece of metal on Graham's table. We were going to ask, so there are a bunch of, these are mission coins, is that right? Oh, these are just from services. But this here, see if you can separate it. These are rare earth magnets. And you can see. Wow. Those are strong magnets. Oh, I got one. Careful. Okay. That's okay. I think I lost one. In any case, we'll get it. We have become dependent upon China for how many things in our supply chain. And they, fortunately, depend on us for how many things. So part of the reason why they got the stalemate in the current, what would otherwise be, you know, Trump's bullying another country, is that he comes up against somebody as strong as we are.

42:25So in that case, he's adapting and adjusting. So I would say, you know, if I'm looking for silver linings, I'm looking in that space. I hate to end on a down note, and I'm conscious of the time and you have to run off. But in terms of the U.S.-China Cold War turning into a hot war, what should we be looking out for? Because as we started this conversation every day, there's a new headline about, you know, China's moving this naval vessel into this particular body of water. And there's propaganda airing in China that's prepping the population for an imminent Taiwanese invasion, that sort of thing.

43:02What would you actually look for as a warning sign? So I think most of the news lines that we hear or statements from people are China hype. And you cannot accuse China of anything today in the U.S. without getting a resonance. So nobody, I mean, I get blamed occasionally for being a China sympathizer by simply saying, what you're asserting is false. Yes, of course, there's many, many things China's doing. So, for example, one of the favorite causes now is China has the fastest nuclear buildup in the world because they're going from about 500 weapons to about 1 ,000 weapons in 2030, which answers, well, that's a historical statement.

43:56And if you look at the number of warheads we went to in the Eisenhower period or the Kennedy period, in both cases there were more. So it just happened not to be true. But there'll be many, many, many accusations of that kind. And I think those will continue because – so China has developed a manufacturing ecosystem that basically can produce anything at scale at half the price that we can. Well, lo and behold, if you go to Walmarts or to Home Depot, half the stuff or more is made in China. People will complain about that. So that part seems right. But I would say that most of this is just hype.

44:35Where you find danger is where there are third parties whose initiative might, like the story of Coursera, produce a set of reactions. And they're the leading candidate of Taiwan and the current president of Taiwan, Lai, who's taken many, many dangerous actions. I think, fortunately, both in the Biden administration and in the Trump administration, they've had conversations at the leader level about not letting this person, by some irresponsible action, drag us hawkism. The other is that the Chinese rules of engagement in their exercises in the Straits and in the South China Sea are now such that it's not very difficult to imagine a collision of a ship or a plane.

45:25We saw that at the beginning of the Bush administration when they collided with one of our spy planes. And so could that escalate? And I think that's why, again, getting back to communication channels between the two parties where they can talk candidly and privately in order to have a circuit breaker if some accident happens, which I think on the current path would be likely to happen. I'm going to ask one more very quick question because you brought up manufacturing just then. And something else that we've been noticing lately is there's a tendency among a lot of Western economies, especially to talk about building up their own manufacturing capacity, including in terms of munitions and rare earth minerals, as you just mentioned.

46:11There was a headline, I think just yesterday, about the UK wanting to build ammunition within its own borders instead of relying on allies. What's the underlying motivation there? Because most people would look at a headline like the UK wants to make its own bullets as, you know, a predecessor maybe to some sort of military conflict. Well, it is puzzling, and there are a lot of puzzling things, but I would say that whenever it's pointed out to people that you're dependent on some other party for supply of something. So, for example, for the U.S., rear-earth magnets are required for almost everything.

46:53So for cars, for iPhones, for laptops, for F-35s, 45s or Kamahawk missiles or whatever. So how would we allow ourselves to be dependent on China? Because that gives them something that they can squeeze that supply chain and be coercive. So I would rather be independent on that. And so any politician would then make an announcement, okay, we're declaring they're going to be independent. Asking what would be required to be done in order to reach that stage, people are not asking. So that would be at the next level. Similarly, if you look, for example, for most pharmaceuticals, most of the pharmaceuticals and the pharmaceutical precursors that we use for any medicines come from either China or from India.

47:42Well, maybe we should do these ourselves. Munitions, we shouldn't be giving out a... So the fact that politicians, when they see somebody says, here's a dependency or a vulnerability, declared that we're going to be independent is, I would say, predictable. If you look and see what behaviors follow from that, the answer is not very many. So I'm almost ready to accept the proposition that we're going to be inextricably entangled in supply chains and economics, in which case some version of mutual deterrence of the sort that we found in the nuclear balance, maybe where we end up. Now, is that a good place to be compared to the elsewhere?

48:29No, I'd rather be independent. But compared, I mean, is that something we can manage if you have competent governments managing? And I would say, you know, yes. All right, Professor Allison, thank you so much for coming on Odd Lots and inviting us to your office here at Harvard. Thank you so much. Yeah, a lot to look at. I'm honored to have you here. Thank you so much. Glad to be on the program. I thank you. Good questions and glad to see two serious students of international affairs. We took our IR background and went into financial. Just the highest praise I've ever got.

49:14Joe, that was a real treat. It was a real treat. Just being in Dr. Allison's office was really nice. I just I could go. You've heard me already say this, but like being a professor at an elite American. A tenured professor. A tenured professor. It's so sick. And then like it's like such a it's like such a dream career to have. You know what bothers me is you and I both did international relations. Oh, yeah. And I think we have a similar complaint. But like that conversation that we just had with Professor Allison was what I thought international relations was going to be. You know, we were going to sit there and pontificate about U.S.-China relations and then compare it to Sparta versus Athens in ancient Greece.

49:57And instead, it was basically all philosophy. It was like game theory. Yeah, I know. It's such a joke. And like it was so abstract. Like I think I had entire courses where we didn't even name a single country like by name. It was just if country A does this, what does country B do? It's such a weird discipline for that reason. And as an adult, I've tried to read some international relations books and it's all this like weird game theory and tables and stuff like that. And just not my thing. I think there's probably – I know we're going off on a little bit of a tangent here. It feels a little bit like the same phenomenon in economics, for example.

50:35Like you study economics, you're going to think about like, well, what's going to happen to the unemployment rate? What's going to happen with the stock market, et cetera? And then you read academic economics. And I'm not as like, you know, I'm like, as I've grown older, as I've matured, I'm like, you know, I like I appreciate academic econ more than I did when I was in my youth. And I was like, oh, it's all this dumb with all these equations and stuff like that. It's all fake. I don't think that is much anymore. But it does feel like kind of disconnected from like, wait, I thought economists talked about, you know, the unemployment rate and stuff like that.

51:10And then you read what a paper is about. It's very abstract. You're right. One thing that did surprise me was when the professor was talking about his latest trip to China. Was it his latest trip? Well, one of his trips to China where he was talking and hearing from Chinese policymakers about how they're very confused by America, and in particular, the example of capitalist New York electing a socialist mayor. And I thought, like, if anyone can understand socialism with capitalistic characteristics, it must be the Chinese. It should be. It should be very intuitive. No, I thought that was like just overall, though, a very I mean, it was a little bit grim.

51:49The idea that almost like we're kind of on borrowed time here. It's like it's been a really long time since the Great Powers War by historical standards. And so it's already been a long time. Historically, they come along more frequently. And now the conditions are in place for this, you know, the so-called Thucydides trap as he sees it. I'm not thrilled that in the best case scenario for the rest of my life, there's always going to be a risk of that being right around the corner. The moment some third party country does something, you know, off the leash. The other thing, and again, this goes back to why I'm so frustrated with IR as an academic discipline, but like the emphasis on good statecraft, good statecraft makes a difference.

52:33Yeah. Right. You know, he talked about the Cuban Missile Crisis and JFK, and we came very, very close to absolute disaster there. But it was ultimately averted by the individual actions of human beings, both in Russia and in the U.S. And I feel like that's kind of what's missing in IR. It's that like emphasis on individual choice and motivations and incentives and how to actually do good statecraft rather than just like look at everything through the prism of either neoliberalism or realism. Or power. Yeah. Or did you ever do gender theory? I don't think I took that. There's an interesting one.

53:10The reason we had the Cuban Missile Crisis is because men and large objects. I am really interested in this idea that unlike the U.S. – so he used the term, I think he said missionary, sort of to characterize how the U.S. sees it spread democracy and liberalism and capitalism. And of course, the Soviet Union also had this impulse to spread communism. And everywhere there was a communist party, it felt some tug to back them up. And that's how the Soviet Union got mired in Afghanistan for years and years. China doesn't really seem to have that. It wants to trade. I mean, outside of it wants to consolidate its physical territory.

53:53But it does not seem like – there's a great story several months ago. Apparently, the Cubans came to China and asked for advice and said, well, have you tried liberalizing your economy? Have you tried basically not being communist? Like it doesn't have that impulse the same way the Soviet Union did. And nor does it have it like the U.S. does. So I'm curious, like as China truly becomes a global power, is a great power, it seems fairly rare historically for it to have so little interest in how other countries manage their affairs. Yeah, I did. I enjoyed the line about, you know, like it's not really about getting more people to be Chinese because it's special to be Chinese in the first place.

54:33We're not good enough to be Chinese. Yeah. All right. Shall we leave it there? Chinese Joe. Let's leave it. Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Allaway. You can follow me at Tracy Allaway. And I'm Joe Weisenthal. You can follow me at The Stalwart. Follow our guest Graham Allison. He's at Graham T. Allison. Follow our producers, Carmen Rodriguez at Carmen Armand Dash. I'll be at Dashbot and Kale Brooks at Kale Brooks. For more Odd Lots content, go to Bloomberg.com slash Odd Lots. We have a daily newsletter and all of our episodes. And you can chat about all of these topics 24-7 with fellow listeners in our Discord, discord.gg slash oddlots.

55:10And if you enjoy Odd Lots, if you like it when we travel to Boston to interview Harvard professors, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

55:38Thank you.

56:04like your business. Across America, over 600 ,000 small businesses, from accountants and architects to photographers and yoga instructors, look to Hiscox Insurance for protection. Find flexible coverage that adapts to the needs of your small business with a fast, easy online quote at hiscox.com. That's H-I-S-C-O-X dot com. There's no business like small business. Hiscox Small Business Insurance. Hey, Ryan Reynolds here. wishing you a very happy half-off holiday because right now Mint Mobile is offering you the gift of 50 % off unlimited. To be clear, that's half price, not half the service. Mint is still premium unlimited wireless for a great price.

56:48So that means a half day. Give it a try at mintmobile.com slash switch. A front payment of$45 for a three-month plan equivalent to$15 per month required. New customer offer for first three months only. Speed slow after 35 gigabytes if network's busy. Taxes and fees extra. See mintmobile.com. Residents at Brightview Senior Living Communities enjoy enhanced possibilities, independence, and choice. Brightview Dulles Corner and Great Falls offer vibrant senior independent living, assisted living, and memory care services through various daily programs, chef-prepared meals, safety and security, transportation, resort-style amenities, and high-quality care.

57:22Take financial possession of your apartment by December 31, 2025 and save. Discover more at brightviewseniorliving.com. Equal housing opportunity.