Today we have a new entry in the Annals of Pseudoscience: an estimate from Bloomberg News that war over Taiwan would be really expensive:
This is based on some handwaving estimates that in the event of war Taiwan's GDP would fall 40%, China's would fall 17%, and US GDP would fall 7%. Add it up and world GDP drops 10.2%. And that's just the first year.
Bloomberg's writeup is light on details, which I suppose is inevitable, but appears to be based on an assumption that a war would cut off 100% of Taiwan's semiconductor manufacturing.
Maybe so. Who knows? But I imagine that your guess is as good as Bloomberg's.
I suspect it would be worse. These economies are so intertwined that the effect of a war would be horrific. It is hard to imagine that the conflict would be limited to just China and Taiwan. Would the US and China start shooting at each other? Would other countries be dragged into the conflict? The effect on the Chinese economy would be devastating. Unemployment would skyrocket. Imports of food to China would be at risk. Would there be riots against the war because of unemployment, poverty and lack of food? Where might China look for help? Russia? North Korea?Iran?
The world will be very very very very very lucky indeed if the worst that happens is a biggish economic hit and not, as I strongly suspect, the ignition of a powder keg that leads to all out war between two nuclear-armed super powers.
Ugh.
Like you, I have some experience living and working in China. (Though I'm back in the US permanently now.)
In my earliest days in China (late 90s) I was surprised at how everyday Chinese I talked to said they were ready to join an invasion of Taiwan tomorrow if they were called. The whole country for decades, at that time, was used to thinking of itself as the just-give-us-the-chance savior of the world. So in retrospect that wasn't so surprising.
However, by my last days in China (mid-2010s), things had changed a lot. The country was much richer and people generally more skeptical of the government. And, this point seems to me never mentioned in media reports because reporters don't know any better: Taiwan's money and educational power had become key to the Chinese economy. Think, for example, of Foxconn, a Taiwanese company, and key maker of Apple stuff -- a huge and very important employer in China. My point being, the Chinese leadership is nothing if not smart about where their bread is buttered. I sorta assumed they understood that Taiwanese investment and know-how was absolutely key to the economy doing well, and the economy doing well was key to keeping the Party in power. Of course if the economy slips for other reasons (like, over-indulgence in real estate), maybe it's a different ball game. And maybe I'm just wrong about all of this because at that time I happened to have a lot of Taiwanese friends. (Another point rarely noted: young people in Taiwan tended, at least in the 2010s, to feel their best job prospects were in China. The two economies are deeply intertwined in ways few people understand. War would surely break all those ties immediately.)
My point being, the Chinese leadership is nothing if not smart about where their bread is buttered.
I don't think that's remotely true since the Xi came to power. His government's non-stop harassment of domestic entrepreneurs and foreign firms indicates party control and the elimination of "dangerous influences"—not prosperity and growth maximization like in the Good Old Days—are the regime's top priorities. Zero covid was another example.
Also, what appears utterly irrational from the perspective of national interest (like, uh, risking war with America for a tiny increase in land area, population and GDP) might be just the ticket in terms of internal CCP politics or in distratching domestic audiences from a softening economy.
My fear is Xi is not just ruthless, but reckless. You and I and virtually every sentient being realizes a Sino-US war would be a cataclysm. But does that universe include Xi? And if it doesn't, is there anybody internally who can stop him? None of might be a huge problem for Americans if the US weren't committed to entering a kinetic war to defend Taiwan. But apparently we are.
Kevin's written about this exact topic:
https://jabberwocking.com/us-ramps-up-troop-presence-in-taiwan/
Those are good points.
I think that in fact an invasion attempt would be a drag on GNP for quite some time — Taiwan is going to put up a hell of a fight, and as rick_jones notes, semiconductor manufacturing infrastructure is delicate. If an invasion were to succeed, Taiwanese industry would need a massive rebuilding.
But I definitely agree about Xi’s worldview; I think he, like Putin, is stuck in the 19th century. So: is his ongoing purge of the military because a) there is real corruption that recently came to light, or b) his generals have learned lessons from Putin’s invasion of Ukraine, and other conflicts, and are expressing caution Xi doesn’t want to hear, or c) both of the above (after all, one of the lessons from Russia is that corruption seriously compromised readiness).
This is why the Republican plan to abandon Ukraine to Putin and broadcast to the world that annexing disputed territories by force is now a legitimate move and we don't give a shit is so brilliant.
The CCP could easily calculate that if they can invade and hold Taiwan for more than about six weeks, the war will exceed Americans' attention spans and we'll eventually get pissed off over the economic impact, give up and say to hell with it, and let's get on with importing those iPhones again.
Yes...
As China's economy falls, odds of war goes up. Xi's consolidation of power is killing off the golden goose, so he might tighten down even more....rinse and repeat.
This is why the Republican plan to abandon Ukraine to Putin
This is way off. Republicans want to abandon Ukraine because their base, commanded by the God-Emperor, wants this. It has nothing to do with Taiwan.
The GOP's stance toward China is maximum 24/7 hawkishness. Trump may privately feel differently, but there is zero doubt that the official GOP position on China is that it's the Evil Mordorian Empire, and that we should double down on anti-China policies, up to and including (in the more radical MAGA corners) switching our embassy from Beijing to Taipei (a move that very likely would lead to military conflict).
This is a very odd calculation with respect to the US since the usual result of US wars since the start of the 20th century has been an increase in GDP. The increase was huge in WW II and afterwards GDP did not fall below trend - there was no post-war depression. Of course there was essentially no damage to the non-military part of the US itself in either of the World Wars. Countries that are actual battlegrounds, like Ukraine now, would suffer loss of infrastructure and capital as well as lives.
Of course this is counting GDP in dollars as usual, and in war a lot of the production is only used to destroy things and kill people, not to make people's lives better. This is an extreme example of how GDP does not necessarily measure real benefit.
I think the GDP damage comes from global supply chain shocks that offset any defense sector gains that take a very long time to trickle down and whose benefits are relatively limited geographically.
If all trade is halted with China, that's an immediate loss of all (T)rade (i)n (V)alue (A)dded of exports and imports between most of US' allies and China. It'd be a repeat of COVID lockdowns but much worse since presumably those trade ties will be permanently severed and thus built anew from the ground up w/ others.
I'd say there would be a better than even chance that not only would 100% of Taiwan's semiconductor manufacturing be "cut off" but a good portion of it would be destroyed. Semiconductor manufacturing equipment isn't exactly robust infrastructure.
Who would be able to make drones one the war started?
Fortunately for the world, an attack on Taiwan by the PRC has become less likely. Xi has found that his military is as corrupt as Putin’s; generals have been siphoning off money that was supposed to buy and maintain weapons: https://www.businessinsider.com/china-corruption-rocket-force-water-fuel-xi-jinping-purge-scandal-2024-1
Xi has to wonder how much weaker his forces might be than he has been led to believe.
Second, the Chinese should have noted the degree to which Ukraine, fighting from land with missiles and airborne and sea-surface drones, has reduced the effectiveness of the Russian Black Sea fleet. It should not have escaped notice that little Taiwan can produce missiles and drones at a far higher rate than China can build warships.
Third, amphibious landings are the most difficult military operations to execute. The U.S. had a lot of practice in WWII, and still the losses were fearful. Given the advances in antiship-missile and drone technology, I think that Chinese vessel losses in any attempted invasion would be so great that they could never land a numerically superior force.
Fourth, another lesson from Ukraine is the continuing effectiveness of land and naval mines for defense, the original loitering munition. In one of Kevin’s Gaza posts, a commenter mentioned Operation Starvation against Japan in WWII; an extremely effective use of air-dropped naval mines to cut Japan off from (primarily) sources of oil and iron. Obviously there have been advances in the technology since then.
No doubt China could do a great deal of damage to Taiwan if it chose, but what would be gained?
I find it interesting that the wars in Iraq and Afghanistan are missing from the "investigation" even though 9/11 and the financial crisis are present. Plus where is the effect of climate change? I bet it will dwarf the impact of an invasion of Taiwan.
I wonder how much *not* contesting an invation of Taiwan would end up costing us? Can we make that calculation?
The reason WW2 made the economy boom is that we borrowed money to build all those tanks and airplanes. Remember War Bonds?
Borrow and Spend may have its down side - namely inflation - but it definitely boosts the economy.