February 9, 2025
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Understanding Geopolitical Tensions In The Blockchain World

The concept coined in 2015 by Graham Allison is known as the Thucydides trap, which exposes how, when a power emerges and threatens the established power, both end up going to war to achieve hegemony. The name of the noted Athenian historian is used because the rise of Athens threatened Spartan supremacy, leading to the terrible Peloponnesian Wars. Allison illustrates this with many examples from recent centuries in which this trap has been fulfilled, such as the rise of the German Empire after the unification of 1870, which challenged British hegemony. Based on these examples, the author warns of the risk that the rise of China may end up provoking an armed confrontation between this country and the US to achieve hegemony.

Although, fortunately, this prophecy has not been fulfilled so far, the hostility between the two powers has fueled the theory of the world of blocs by which countries will align themselves with one of the two powers, alignments that will generate, in the best of cases , geopolitical clashes similar to those experienced during the Cold War.

This theory has been cemented in recent years by the trade war, via tariffs, between China and the US, as well as by the very relevant war of chips (semiconductors) recently exacerbated with other derivations (such as the consideration of TikTok as a risk for US security). As if that were not enough, possible armed conflicts in Taiwan are being debated, in addition to the alignment of powers in the Pacific preparing for a turbulent future. Finally, Janet Yellen, Secretary of the US Treasury, introduced the concept of friendshoring, fueling the thesis that investment flows to locate supply chains will be highly oriented by the geopolitical block on which each country pivots, and many analysts has warned of another formidable trend, insourcing, by which a large part of the manufacturing activity outsourced to emerging countries since the 1990s will return to the West.

China’s achievement in beating the US in the war of chips (and why doubt it):

Michael Mcloughlin

Washington has been trying by all means to prevent Beijing from creating state-of-the-art processors by vetoing it access to the necessary technology. Despite everything, a report warns that he would have managed to do it
Well, well, in my opinion, the reality will be much less famous than the one drawn by the alarming headlines that expose the points of the previous paragraph.

Let’s see why:

First: although China is already the main trading partner of 150 countries in the world (out of a total of 196), this does not mean that these trade relations cause geopolitical alignments. China is Europe’s main trading partner, and yet Europe is aligned with the US. Shared values and capital flows matter a lot.

Second: China and the West need each other in international trade. The US depends on China for a significant part of manufacturing activity, because the latter’s wages and logistics are extremely competitive. China in turn needs the US and European consumer markets (the two largest on Earth) to fuel these exports. It is relevant that, in my opinion, China needs the West more than the other way around. Its economy suffers from a series of structural weaknesses (fourth point), and the way to alleviate them is through the foreign sector. If it were to suffer, China’s per capita income would suffer much more than the West (Western companies could relocate their supply chains to other parts of Southeast Asia, which would create headaches, but not a shock, a shock that China would suffer). through the rise in unemployment and the fall in wages associated with the supposed factory stampede). A sharp drop in China’s GDP per capita could provoke a questioning of the political regime by the population. Furthermore, the number of factories that have actually returned to the West has so far been negligible. Labor costs remain very uneven.

When China has a cold, we all have a headache:

Javier Brandoli

China has shown signs of economic weakness for the first time in decades after a strict zero-covid policy sparked intense protests across the country.
Third: China and the US need each other in the capital markets. The consequence of China exporting more than it imports is that it accumulates a current account surplus that it has to channel. Emerging countries do not have sufficiently liquid and deep markets to enable said surplus, at most they monopolize 10% of it (especially due to the increasingly rundown One Belt One Road program). The rest ends up in the dollar zone, especially in the US and Canada. Therefore, it makes no difference whether China buys oil from Russia in yuan or rubles. The final product will end up in dollars, thus maintaining its status as the world’s reserve currency. The US, in turn, partly finances its current account deficit with the Chinese surplus. It is a symbiosis that nobody is interested in ending.

Fourth: China’s rise is increasingly being questioned. In 2022, China will grow at the lowest level since Mao’s death. In the future, it faces: i) the consequences of the bursting of its real estate bubble, ii) an overinvestment in infrastructure financed with excessive debt, iii) an unprecedented demographic crisis and iv) the threat that a greater power of the public sector will pose in the form of lower productivity. These four factors will cause the growth differential between the US and China to narrow dramatically, which could mean that the Chinese economy will not outperform the US.

The bursting of the Chinese housing bubble exacerbates Beijing’s economic problems:

The Wall Street Journal. Rebecca Feng and Cao Li

Home sales and prices are falling in many cities across the country after rising for years, and the damage is spreading
I do not claim that a world that trades is a world that does not end in conflict. Famous forecasts in this regard (in 1910, Agnell’s book The Great Illusion argued that commercial interconnection between the United Kingdom and Germany would forever prevent war between the two) failed miserably. I affirm that foreign policy reflects interests rather than ideals, and the interests to date point against the conflict. Recent Chinese diplomatic moves, ending strident spokesmen and re-building bridges with the West, point in this direction.

During the Peloponnesian Wars, a terrible plague devastated Athens and killed almost half its population (among others, its leader Pericles died, and Thucydides himself barely survived it), while the Spartan army devastated the fields that fed the Athens region. In the end, the war was won by Sparta, but the Greek city-states were so weakened that the hard-fought independence ended up succumbing to the semi-barbarous Macedonia of Philip II and his son Alexander the Great.

Interests, and a certain knowledge of History, should invite world powers to conclude that it is better to collaborate than collide.

This article is originally published on msn.com

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