An Economic Divorce Or Seperation

Yesterday’s article got me to thinking about China and global economics. I wanted to share the fruits of that thought with you today.

There has long been a theory that since the economy is largely global and more and more countries are to varying degrees economically interdependent that the chances of a global military conflict are significantly diminished. While I don’t think that is an absolute, I must admit I give it significant credence.

Yesterday I outlined how China was a player in Middle East relations and appears to be jockeying to become one in European relations. Left unsaid in today’s discussion is that China is already a major player in Africa.

While not the only “side discussion” the interdependency of the Chinese and American economies cannot be ignored. Both are a huge market for the other. China is a major supplier of raw materials needed in American manufacturing. On the other hand, America supplies China much of the technology it needs. The natural result of both of those situations is that both countries are major customers of the other. (Many other trade “commodities” are much more easily replaced.)

If we were to somewhat suddenly be on opposite sides of a military conflict could either economy survive and if so, how easily? Along those lines are provisions being made for such a split? If that is even in the planning stages (and on the American side I certainly hope it is) how quickly and efficiently can it happen if needed?

Like any economic change – just think of the structural inflation and supply chain issues that arose from the early stages of the pandemic – how will the public react. In this case I’m particularly thinking of the American public.

Carry that a step further. How will countries other than the United States or China react when they can’t get certain goods? We are seeing part of this with relation to the war in Ukraine. The situation I’m envisioning is that situation on steroids. I’m not old enough to have lived it, but I certainly heard the stories of World War II shortages and rationing. (And that is from America which was almost completely untouched on the home front. That was a picnic compared to Germany or France. As an aside, our inane health care delivery system is a product of domestic World War II economic realities.)

While I tend to lean dove, I’m far from a complete one. There are some things worth sacrificing and if necessary, going to war for and democracy is one of them. If the situation in Ukraine significantly escalates – and I think there is a good possibility that it will – it will certainly bring further economic hardships necessitating sacrifice. Who, including Americans, are willing to endure them? And if so, to what degree?

I hope the economic interdependence theory wins out. If it doesn’t, we must prepare for the alternative. The balancing act will be something to observe. Divorce or separation doesn’t really matter. Either will be painful and the party that is caught blindsided will, at least in the short run, suffer the most.

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