Robert D. Kaplan on China, Taiwan, and the War That Could Break the World Economy- The Fifth Column

Added: 2026-05-13

[00:00:00]you've located China and broader kind of Indian Ocean, South China Sea as as the place that we should be thinking about in terms of the world. So to bastardize a book title formulation that I hate which is the why fill in the blank matters to the worst um apologies to your friend, late friend. Um but um can you give a sense of for people who like me have never been to that part of the world why does that region matter so much in the future of ge geopolitics >> because uh 40% of oil of all oil gas and goods by tonnage goes through the south China south China sea in the world the south China sea is the most important choke point and to the degree that the world economy has uh has a geographical um heartland. It's increasingly the west western. It's increasingly the western Pacific. Um China is now that accounts for 26% of all global manufacturing capacity. Crazy.

[00:01:10]>> Um no, it it's incredible. Look, we've had wars recently in Gaza, in Ukraine, now in Iran, and it hasn't affected our retirement accounts very much. It I mean, I'm sorry to be crass, but I have to say this, it hasn't affected our life savings at all. I mean, even the Iran war, at the worst moment of it, before the market recovered, the market was down 8%. That's a normal correction, so to speak. So, it's been impressive how financial markets have priced in conflict in Ukraine, the Middle East, Africa, everywhere. But financial markets would not be able to price in a a high-end war in the Western Pacific between the world's largest three largest economies um the US, China and Japan lobbing precisiong guided missiles at each other through submarines etc etc like that and you know u mo most of the microchips are made in Taiwan. So you not only have the largest economies, you have supply chains, you have se you know sea lines of communication.

[00:02:24]As long as the Western Pacific stays stable, our world moves on. Maybe it may unravel a bit, maybe more violent than optimists say and all of that, but it goes on and on. But a war in the Western Pacific of the kind I described could be like a World War I scenario in the sense of how it would change all of our lives because we would look at our retirement accounts down 40 50% and the Federal Reserve would have no answer to it unlike it had an answer to COVID. So I mean it's kind of in the end the opposite of what we thought or a lot of people thought in ' 89 9091 that as markets open up in places democracy is more likely to flourish I mean that still might be true but China was an example of that right whereas the opposite seems to be true that you know you don't want to destabilize the Chinese government you don't want to come to Taiwan's rescue if it is going to affect markets in that way >> it's tricky And because it's tricky, it's so dangerous. In other words, what really co caused World War I? Odd Arna Westad at Yale. Uh, you know, points out that the reason the Germans miscalculated and thought that they could win a war and therefore went to war was because they thought that the British would not come to the rescue of the French because the British suddenly became dovish at a certain point that maybe they wouldn't come to the rescue of the French. Why risk it? and and that that caused the Germans to miscalculate.

[00:04:06]So, it's not so simple as simply saying we won't come to Taiwan's rescue, you know, because that could cause the Chinese to miscalculate, attack Taiwan, and then we'd be in such a diff a different situation that whatever we said in the past about not coming to Taiwan's rescue could be moot.

[00:04:27]Yeah. You know, >> but it is obviously the stakes are very different than if the Argentinians decide to go after the Faullands again, right? If the Melvenos, I mean, who cares, right? I mean, the Reagan administration didn't care, but Thatcher did, but something like that. I mean, we had and I mean, you've written a lot about this in about the kind of Fukuyama thing. I mean, there was a question mark on on the end of Fukyama's, the end of history, right? We don't know, but we knew where he went with that. But that sense that that markets will you know precipitate democracy.

[00:05:02]What do you think of that now kind of taking China out of it? Because that's always the example people give. Was that true in I mean that was the optimism of the end of the cold war is that I think there that is the thing about optimism.

[00:05:16]The idea that democracy was going to flourish. Perhaps there were people that thought that. I think there were a lot of people that were just optimistic and hopeful that it would and it didn't in certain places. Eastern Europe being obviously another very different different case. But is it true that sort of more open trade, more open markets tends to make places more democratic in more sort of more liberal democracy is going to flourish than you know closed off trade. I mean that was a big idea in the '90s.

[00:05:43]>> Yeah. And also Fukuyama's book was right in the sense that he meant the end of history in a Hegelian sense. Uh whereas it would be it was really the end of an argument. Yeah.

[00:05:56]>> And one side won the argument and the other side lost. Fair fair enough. He didn't make any predictions about the end of warfare or coups or anything like that. That was ascribed to him but wrongly you know >> and he's only just started defending himself on this recently by the way. I saw a couple of pieces that he wrote and it was like oh finally >> he had done it initially but then like >> well it's interesting. I've been defending him over the years on that because I hate when big theory pieces get misunderstood and and simplified.

[00:06:26]>> Does that ever happen to you? [laughter] >> Yes. Yeah. Yeah. Yeah. And it happened to Sam Huntington too. Yeah. Uh uh uh often uh you know the clash of civilizations was really not not about it was about another phase in the end of the modern world. Yeah. You know that's really what it was. But yeah, your point is true. open markets, free trade, um all this uh do tend to make democracies flourish uh more off uh more often. Um in China, even though you said leave China out, China is an interesting example because China under Jang Zen uh developed dramatically. Um and but it was always you know the problem with predicting the Chinese economy and system is that we often forget it's an authoritarian system. So what if no but no but people make these arguments that it's unsustainable you know they have too much debt all of this I say that would be the case in a democratic system but their system they can always fix the outcome. Yeah, I mean the same with the Russian economy as as >> Yeah, >> but there are constraints on that your ability to kind of gain the outcome.

[00:07:43]Certainly, you can have capital flight with all of the international investment, the foreign investment that's been pouring into China, you maybe don't want to be there if they're making taking a more authoritarian turn and things are less predictable.

[00:07:55]>> Yeah. Yeah. It scares away investment.

[00:07:58]>> So, are we seeing that begin to happen in China in your estimation? Because I know your prediction is pretty leaving.

[00:08:04]you know, they're moving to Vietnam and other places. It, you know, it's happening, but if it's happening enough, I don't know. But I agree with what you said earlier that, you know, we think that the worst thing for China is now Xiinping's Leninist authoritar authorit the worst might be come after >> because China may not hold together.

[00:08:28]>> See, see that's the other thing. It's like with Putin too. What's worse for Europe than Putin? I would say a Russia where there's nobody in charge and they still have nuclear weapons kind of uh Russia could become like a low calorie version of the former Yugoslavia after Putin because Russia unlike China has does not have the history of bureaucratic institutionalization.

[00:08:56]>> Yeah. Um uh you know Russia was always weakly governed even under the zars you know if you go back well China is the you the hearth place of bureaucracy going back thousands of years >> is it is that an example of you worst case scenarioing or do you suspect that that is a real possibility a real possibility >> no because Putin has so eviscerated the Russian system that uh and he's in his 70s that it's unclear what would happen after him.

[00:09:29]>> Yeah. There's no succession plan that we can see. I' I've seen you uh talk about uh the role of the Ukrainian war um on on Russia. Ukraine's been making some gains on the battlefield. Um it's not as stalemateish, still a stalemate, but >> at least the stalemates tilt.

[00:09:47]>> I mean, even the stalemate is impressive. Yeah.

[00:09:48]>> Um stalemate's incredibly impressive.

[00:09:51]What's your kind of snapshot feeling of where that is now and the vulnerability of Putin now just because of that war?

[00:09:58]How that changes?

[00:09:59]>> The Ukraine war has gone on as long as World War I.

[00:10:03]>> Yeah.

[00:10:03]>> Um World War I changed the century because it went on for four long years.

[00:10:09]Had it ended in 1915 after the Battle of the Sum or something like that. It wouldn't have had the effect. Uh the Hapsburgs would probably still stayed in power. uh Hitler never would have come to power. All kinds of things would not have happened. It's because World War I went on for four long years. And I I think that the Ukraine war is hollowing out Russia. Russia already has very has less and less uh capability to to influence the Caucuses, Central Asia, the Siberia, the Russian Far East. The empire is disappearing on Russia. uh you know you know as we speak and nobody has captured this because they're all block their vision is all blocked out by the fighting in Ukraine.