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The Chinese Economic Miracle and Thucydides’ Trap

Updated: Nov 22, 2021

Victor Luca, 29-May-21


Designed to operate for more than a decade, the Chinese Space Station, the first module of which was recently launched on board a Long March 5B rocket (left), will have 14 refrigerator-sized experiment racks and 50 external docking points designed for experiments outside the station to test how materials react in space. Image on the right is the first completely indigenous 3rd generation nuclear reactor to be built in China.

More than 2,500 years ago the Athenian historian and Military General, Thucydides, in his history of the Peloponnesian War, concluded that “It was the rise of Athens and the fear that this inspired in Sparta that made war inevitable”. Nowadays we talk about the Thucydides’ Trap in reference to the current world order and the tensions between the two great powers, the United States and China.

The disintegration of the Soviet Union in the late eighties left the United States of America as the sole world superpower. The United States is of course a great nation and is commonly regarded as the ‘richest nation in the history of the world’, although that wealth is spread very unevenly. This top ranking is due largely to the tremendous scientific and technological development that occurred post World War II and the new world order established by the Bretton Woods System together with the growth of a capitalist machine that provides strong incentives to turn that scientific and technological prowess into what we call wealth.

Quietly, starting from about the 1980s, China started to change the way it did things. You could call this period the start of the Chinese industrial revolution. Europe’s industrial revolution started about 250 years earlier and now it would seem that it is the turn of China.

Fast forward to today and we live in a world where almost everything you pick up is made in China, and as a result, more than 500 million Chinese people have been lifted out of abject poverty. This has truly been a miracle. The other great power of course doesn’t like this and it has undertaken a systematic campaign to rein China in.

Some consider China’s dramatic assent as an engineered bubble, others as China’s natural destiny. I would argue that the miracle stems from a tradition of thousands of years of technological development followed by a brief period of dormancy. The Chinese probably developed the first writing systems. They invented the compass, gun powder, paper money and made numerous other early inventions.

Yes, China is a totalitarian state which is not ideal from the perspective of a medium sized European nation, and its human rights attitudes are at best questionable. However, China is a nation of 1.4 billion people, and what suits the west, will undoubtedly not be suitable for China.

Although many criticize human rights in China, we should not forget that it was only as far back as 1952 that the US state of Delaware was carrying out public floggings. Of course, it was mostly blacks that were being flogged. We should also not forget that it was only relatively recently in the west that women were given the vote, permitted to drive and join the Bondi Beach surf club.

So it is not like there is not a good level of dysfuntionality in the west today. We only need to look at the United States after four years of Trump to see how dysfunctional this ‘pseudo-democratic’ corporatized superpower has become and how close America came to fascism.

America has become a nation barely able to feed its own people. A nation where good education and medical care is the province of the elite and where homelessness is rife. The scourge of poverty is on display on almost any street corner of any major US city. Brutal capitalism and wealth disparity has burgeoned.

It wasn’t Trump alone that achieved this as the gutting of the middle class probably started with the actor president, Ronald Reagan and the development of neoliberal economics. America has become a nation ruled by corporations that prefers to keep people away from the voting booths while they send their lobbyists to Washington and offer bribes disguised as political donations to ensure they get what they want. The bogey man is regularly trotted out to scare the population into sanctioning extravagant expenditure on a massive military-industrial complex comprising 800 military basis in 70 countries. In contrast, Britain, France and Russia have about 30 foreign bases combined. In terms of arms sales, excluding China, the United States is responsible for a whopping 59% of global arms sales eclipsing Russia (8.6%), United Kingdom (8.4%), France (5.5%), Italy (2.8%), Trans-Europe (3.7%), Japan (2.4%), Israel (2.2%), Germany (2.0%), India (1.4%), S. Korea (1.2%) and the remainder (3.4%) by a substantial margin. In contrast, the best estimates would only put China near the bottom of the top 10 arms producers.

The bogey man has gone from the Nazis to the Russians and now, most recently, the Chinese. The great American political theorist, Sheldon Wolin, referred to this situation as ‘inverted totalitarianism‘ in reference to the fact that it is corporations that run the democratic pageant.

Breaking through the smoke screen, it is worth pondering whether China is just doing what is right for China. And boy are they doing it, much to the chagrin of the United States. Including, it would seem, the United States of Joe Biden.

The Americans complain about what China is doing to them, as they play the victims. The trade wars of Trump were not able to take China down. US complaints about patent violations and intellectual property theft may have some validity, but they can hardly blame China for the fact that they gutted their own manufacturing capability. US companies fled to China of their own accord seeking lower production costs and access to the huge and increasingly lucrative Chinese market. China allowed this to happen but only in return for an exchange of knowledge which US companies were ostensibly happy to give away.

Therefore, today there are currently over 300 US corporations that are doing business in China. They didn’t go there for nothing. They went for their own benefit and they brokered deals with the Chinese government for the privilege to tap into cheap labor and a huge market.

China hasn’t only become a home to US corporations, it has grown enormously in its own right especially in the areas of telecommunications, aerospace and so forth. They already are possibly leading the Americans in these fields.

The US education system is a for-profit business just like ours. When I went to the US to do my post-doctoral training in the late 80s, out of a research group of 20, there were only two Americans. Most Americans opted out of science fields and into finance. Many Chinese that got educated in ivy league US universities returned to China and set themselves up there; not all but many. Today these Chinese researchers want for nothing and have research groups that are probably at least twice the size of the average US university research group. In my estimation, China is producing probably upwards of 70% of all scientific publications in science, technology, engineering and math fields.

On 27-Nov-20 China National Nuclear Corporation (CNNC) announced the connection of its Fuqing-5 nuclear reactor to the national power grid. This reactor utilizes China's Hualong One third-generation nuclear technology. This reactor was built on-time and on-budget, something that is unheard of in recent nuclear history. Meanwhile, as I write, the first reactor fuel is scheduled to be loaded into the Olkiluoto 3 European Power Reactor (EPR) in Finland. The 1600 MW EPR is a French generation 3+ reactor design that is being provided to the Finnish utility Teollisuuden Voima Oyj (TVO) by the Areva-Siemens consortium. Grid connection is now scheduled for October 2021, with regular electricity production due to start in February 2022. The reactor construction project commenced in 2009 and is now 12 years behind schedule. Construction of the reactor was originally budgeted at €3 billion and will now cost about €8.5 billion. It has been described as the second-most expensive building in human history, behind a hotel complex in Mecca.

On the 28th of April China gave its space exploration program some serious forward impetus with the launch of the first module of the Chinese Space Station dubbed Tianhe, or “Harmony of the Heavens” aboard a Long March 5B rocket. This occurred at the same time as President Biden was giving his 100-day speech on 29-Apr-21 in which China was at the tip of his tongue.

This unstoppable technological progress, coupled with dissent over the Chinese governance of Hong Kong, aspirations to take back Taiwan and domination of the South China Sea is a cause of concern to the other superpower as attested to in Biden’s 100-day speech.

None of this Chinese development has occurred by accident. It has been quite deliberately and methodically engineered by Chinese heads of state of the past 40 years. Not coincidentally these heads of state have been technocrats (engineers), not puppets, like Reagan the actor, and Trump the reality TV star.

I wouldn’t live in China for all the money in the world, but I can’t help but gaze in wonderment at what they have and are achieving. Who can deny them a place at the superpower table?

My only hope is that China’s superpower status does not precipitate military action, or heaven forbid, a nuclear war. I hope that these two great super powers do not fall into Thucydides’ Trap. Countries like Australia and New Zealand need to tone down their rhetoric because when you play with dragons, you risk getting burned.

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