Am I stuck in soldier mindset if I stress my 'folk priors,' which find ample confirmation in the Russia-Ukraine crisis, and which remain crucial takeaways? See my list, below. I trust that readers can readily supply illustrations from the concrete history of the crisis.
a) It's complicated.
b) Most people don't think it's complicated.
c) Competition among States raises the stakes and intensity of decision-making under uncertainty.
d) The great man theory of history is half right.
e) History is the result of human action, not any human design.
f) Statesmen are prone to illusion of control.
g) Statesmen often overestimate the rationality of their enemies.
h) Statesmen often underestimate the rationality of their enemies.
i) Politics is about status.
j) People care a lot about status.
k) It's very risky to poke a bear.
l) Consensus about red lines is elusive in the shadow and crucible of war.
m) What is unthinkable today can become righteous tomorrow.
n) It's hard to see through the fog of war.
o) Social desirability bias compounds the fog of war.
One thing I think I learned is that Russia isn’t particularly important economically.
Everyone at the company I work for was concerned about the impact of the sanctions, but when we looked at the numbers, we found that our revenue from Russia was trivial… and “trivial” might overstate it. The complexity and risk of navigating the sanctions regime, and the challenges of getting money out of the country given the financial industry sanctions, were much greater than simply cutting off all sales to Russia. This was surprising. I suspect everyone realizing “selling to Russia isn’t worth the hassle” is why you saw so many western companies simply stopping sales to Russia.
In contrast, I spent a good bit of time over the prior year trying to get trade licenses to sell to Huawei. Huawei was much more important economically than the entire country of Russia. By a lot.
Perhaps a corollary is that Russia seems more dependent on its energy exports than Europe is dependent on importing energy from Russia. I had thought Russia’s ability to cut off energy supplies to Europe was going to be an “Ace up Russia’s sleeve”. But it doesn’t seem to be playing out that way.
Given the above, I think people (myself included) need to be more thoughtful about what lessons we export from Russia to China. The interdependency of the Western and Chinese economies is enormous, even setting aside semiconductors and Taiwan. The consequences of a similar dust up with the Chinese would be extremely different than what we’ve seen here.
Semi-conductors. It seems that Neon gas is crucial in semiconductor manufacture as the etching lasers need it… Ukraine supplies 50% of neon. The gas is not difficult to extract from the atmosphere but it needs a lot of energy. Russia/Ukraine are energy-rich.
Russia supplies a large amount of the World’s fertiliser without which food production slumps, food prices go up. Fertiliser is made from natural gas of which Russia has plenty.
Society advance is based on ‘power’ - power that energy creates. Mankind started out as a primitive with little power, just fire, and advanced as his ability to produce power increased.
It takes a huge amount of power to send men to the Moon, huge amounts of power to build skyscrapers, bridges, smelt aluminium, produce food, distribute food and goods and much more.
The West via its Net Zero is determined significantly to reduce its ability to produce power, even relying on the randomness of nature - wind & solar - to provide it, unreliable and intermittently. The West already is reducing its output to reduce its use of power as it reduces availability of energy. That in turn will cause economic regression.
So the more advanced economic power wins? No the more energy rich, able to produce more power wins. That’s going to be Russia, China and soon India. There is no economic power, without energy power.
What should be learned is ‘power’ does not mean strength, it means ability to manufacture, move, construct, create/extract new materials, to do new power hungry things, new technology - advance.
I would suggest also that, given pressure, more energy resources can be developed and found. The shale revolution should be a teaching event. So should the innovations in production even in mature conventional oil wells over the last 15 years. The experts tended to be pessimistic about both of those technologies. But the pessimists have been correct about 'green energy,' which just involves turning lots of fossil fuels into a worse energy generation technology through a very roundabout process.
Can be developed? We already have them developed but we may not use them. Europe forbids fracking and now US Govt is restricting it. That’s my point. The West is in autodestruct reducing its power output whilst others are increasing theirs.
Yes, if Europe and the US allowed development of more fracking fields some of these problems would be alleviated. Same thing with more nuclear development and more uranium exploration and mining.
“ And I, for one, do not know what to make of it.” I wish more people didn’t treat a willingness to say this as some kind of character flaw. It’s like they confuse the category of “facts about the universe” with the category of “ethical principles.” Is it because they are so attached to specific applications of those ethical principles to specific facts that they can’t change the application when the facts change, because they feel like they are abandoning the principle?
Your excellent comment: "We should be asking ourselves about the psychological effect of nuclear weapons in the hands of an unpredictable autocratic regime. That could turn out to be by far the most important lesson to get our arms around" was flashing through my head when I heard about Biden's direct threat to Putin's future in power when the Russian has the biggest finger on the nuclear button in the world.
I was shocked by the stupidity and huge risk to the world of our president's off-the-cuff comments. He shut off Putin's option of declaring victory and going home with some paper promises in hand.
I've often criticized your takes on the war, but I agree with this one 100 percent.
Edit to add: Yours is one of very few substacks I subscribe to, because although your opinions often put a frown on my face, you are open to a very wide swath of information and you synthesize it in lucid ways. I learn a lot here.
Although the current round of sanctions hasn't bitten the RU military yet, there is a case to be made that the earlier sanctions imposed in 2014 effectively reduced its technological capacity:
But while my Slovak wife is studying Ukrainian to better help some of the many Ukrainians here in Bratislava, I'm following lots of other folk.
A big thing learned is that far too little pundit effort was spent on analyzing Ukraine's military, as compared to Russia or NATO. I also learned about the hugely important early Ukraine actions of blowing up dams - to release flood waters - to create fields of mud. Forcing Russians to use limited roads rather than flat, muddy, fields.
I favored "No-Fly Zones" for a day or so, but now I'm sure it's a mistake. More anti-tank & Surface-to-Air anti-aircraft missiles and weapons (like Obama-Biden refused in 2014 but Trump started sending). The Ukrainians are willing to fight, and kill, for Ukraine. That can stop the Russians from winning.
I also learned I was right right right about Trump over Biden. Every single pundit who supported Biden is, ever so slightly, partly to blame for Biden's weakness. (Just as we Trump-supporters are partly to blame for his blowhard tweets.) I noticed, clearly, how Arnold avoids talking about the 2020 Biden-Trump question and whether any voters should learn anything from that.
I'm also sadly disappointed about how very very few Fantasy Intellectuals supported Trump - but I haven't yet made the effort to document them. I know Arnold voted ... present (essentially). I would think this crisis would show more folk that the lesser evil of two is sometimes really important. I pray Biden's loose lips don't lead to any nuclear slips; such an "I told you so" is too terrible.
We learned from the 2008 - 2020 recession that the Fed was prepared to accept below target inflation for years upon years. This might make us more willing to believe that it will accept above average inflation for years upon years. But that plus the post September performance certainly raises the risk.
I feel very suspicious that we are getting much beyond cheerleading from the MSM. I’ve heard a few experts like Samo Burja saying that mechanized artillery based warfare just takes a while. All the aside shouldn’t we be more worried about the ripple effects of food price spikes?
I don't see the economic balance favoring the West. Not by a long shot. Russia, China, and India alone are a majority of the earth's 11 billion people, and they're all on the other team (and have created a SWIFT substitute). They also have most of the manufacturing capability. Putting a sanctions "fence" around them gives them more consumers and a more capable economy. They will outgrow us for as long as the division lasts.
And of course, the party in power in the US is not even trying to stop it, because Biden, Romney, Kerry, Pelosi, and their sons are on Russian and Chinese as well as Ukrainian payrolls. They are Quislings and the media are in cahoots with them.
Arnold, I like your comment about you needing to get your arms around the nuclear issue. I for one like a concept you mentioned many years ago about the difference between institutions that are "hard to break" versus "easy to fix." Politically, the emphasis is always on "hard to break". In our current environment, risks associated with nuclear war are overwhelmingly couched in a context of "hard to break" (i.e., deterrence). Although this is absolutely a crucial and necessary perspective (after all, nuclear war would be horrible), the "easy to fix" avenue needs to be explored and implemented also. In other words, some resources should be dedicated to hardening the West, in the horrible event that nuclear war comes. There is currently almost zero effort dedicated to this (at least in the West), which I think is a mistake. Warfare of any type (be is conventional or nuclear) should be mitigated through layers, and civil defense is one such layer.
The US abandoned civil defense efforts when the cobalt bomb was invented. It effectively makes shelters useless, at least if the enemy wants them to be, because whoever sends a bomb can render the target area poisonous for as long as they like.
This policy has mostly not been talked about since the initial discovery because we don't want bad actors to think of it. But they will and have anyway.
It turned out that Fannie and Freddie had taken on too many low-quality loans, but that is in hindsight; I suggest that your criticism of these companies is an instance of Hindsight Bias. No one expected the Fed to mismanage monetary policy in 2008 to the extent that so many mortgage holders would be unable to make their interest payments (or would find it advantageous to default). Bernanke had promised Milton Friedman, "We won't do it again"; but, to everyone's surprise, he broke that promise.
> it seems to me that one thing we did not learn is that what matters in international conflict is GDP.
It probably makes more sense if you also think in terms of GDP per capita. Throw in population and it gives a useful parameter to think of things.
Russia's GDP is much greater than Ukraine's, but it's GDP per capita is relatively comparable. So for Russia to "win" by devoting its big GDP advantage to the war, it would have to throw many times the amount of resources at Ukraine as it currently is (because they're at near parity in committed military forces).
Even for an authoritarian country, devoting a lot of resources to "total war" seems politically difficult.
I think this can be seen in the US invasion of Iraq as well. The US had both an overwhelming GDP and GDP/capita advantage, it could get away with destroying the Iraqi regime by using only a fraction of its overall strength. Consider the hypothetical where the US' initial invasion had met dramatic and effective resistance. In that case, would the US have had the political willpower to double or triple the number of troops we committed to the war? Maybe, but if it required truly shifting a noticeable amount of resources away from BUTTER to GUNS, a lot of people would object.
So GDP by itself isn't a great determinant, but I think GDP per capita is probably a decent proxy for combat ability.
1. A huge GDP per capita advantage will let a country wage "wars of convenience" because it can wage war on weaker countries without forcing the consequence of redirecting significant amounts of total GDP to the war effort.
2. If GDP per capita is roughly equal, then the side that's more willing to commit all of its GDP to war probably has the advantage, not the side with the highest GDP.
(That is, this started out as a "war of convenience" for Russia. For Ukraine, it's seen as a "war of survival", so they're willing to commit basically their whole GDP to the effort. Perhaps their losses so far have made this a "war of survival" for the Russian regime as well, and because they do have a much larger GDP, they could win in this kind of "Total War" scenario, but it will require devoting a lot more of their economic capacity to the war effort than they have, so far, been willing to devote. Because, of course, it will be politically hard to do so).
I think this is a very important point people often miss, especially with regards to China. Sure, China has the biggest economy in the world, but they also have ~1/7th of the world's population working in it, which makes it a lot less impressive. A very productive economy allows for lots of stupid money pits and corruption in the government, and arguably external wars are mostly those sorts of money pits. You need a lot of slack to throw resources into a zero or negative sum game for a long period of time, and GDP per capita measures that slack a lot better than just GDP.
The assumption is that China's GDP/Capita is only what it is because it started being a real (non-communist) country so late. In another 25 years shouldn't we expect it to be putting up GDP/capita figures similar to other East Asian countries like Japan, Korea, or Taiwan.
This is kind of tangential, but I think it's going to be really hard to figure what happens in these countries because the /Capita part of the equation is going to be changing so dramatically.
Japan seems further along in this process, and they've had a very hard time moving to a country with a falling population. I imagine it might get a lot more messy for China, but I don't have any sense of how; just a general intuition that, like Russia, the traditional governmental solution of throwing mass quantities at a problem doesn't work as well when you no longer have limitless numbers of people
That is a poor assumption, however, as 1: China is still a communist country, only less so on some margins, and 2: being far less than free and very top down still there is little reason to expect continuous growth. The USSR had a burst of growth early on, then basically flatlined. That seems to be pattern with most countries: go from full on poor authoritarian, loosen up due to a newer and more efficient leader, get a boost of GDP growth for a few years as industries catch up to leading countries, plateau at the new higher level with low growth based on what freedom your government allows.
The US is almost certainly in the same position, just coming at it from the other side as it were. 2% growth is the norm only partly because we are close to the growth frontier (no catch up growth for us), the rest is built in inefficiencies and innovation requiring ever more regulatory permission to occur.
China seems to have gone about as far as it can go just by catch up growth and moderate liberation. The election of a dictator signals to me that they are nervous about internal stability and are focusing on maintaining control that they were losing over their upper class industrialists. They are not going to become less repressive, and will trade growth in the process.
All of the Asian Tigers were essentially authoritarian states to one degree or another for most of their history, especially their high growth phase. Japan, Korea, Taiwan, Singapore, all the same. Usually dominated by a single individual or party that won every election, to the extent elections were even allowed.
Nor did those governments stop from "meddling in the economy". Most had lots of economic regulation and industrial planning. Japan and MITI. Literal "four year plans".
It's certainly true that full communism is economic death. And its true that China could never use the government managed export driven growth model of those countries to the same degree because its too big.
But at the end of the day "authoritarianism" and government regulation are to a certain extent present in all societies (including our own).
My guess is that, given the IQ level of China, its still way below the gdp/capita you would expect. I don't know if they will get all the way to Japan, but I think they will grow faster then us over the next 25 years.
Up until your last paragraph, that was exactly my point... are you agreeing with me? Your tone seems to imply that you are not.
As to the last paragraph, I think IQ matters less than government policy, in so far as you can have a super high IQ country and still be very poor because the government is doing things that kill productivity. Measuring IQ is easy compared to government policy, so if IQ is high and productivity low, one should probably assume the government policies are bad, and without good reason to think otherwise will continue to be bad.
You seem to imply that China's GDP isn't going to grow far beyond where it is now, around $10k. But Japan is around 40k and Korea and Taiwan are 30k. I think it likely that China will achieve or come close to those levels, which is a big increase over where it is now. Some of this change could come simply by changing the exchange rate peg (PPP china is already $17k per capita).
At 30k per capita China would be vastly larger in total GDP than the USA.
I think IQ is the main driver of both economic growth and good government policy. Communism was ultimately a detour, but China has abandoned communism. It's mixed market just like everyplace else now. "Democracy" doesn't appear to be the main driver of economic growth so much as good courts and institutions, as shown by the economic growth of the un-democratic Asian tigers.
I didn't spend the time to think it out. Do you think adding PPP would make a meaningful difference?
I'm not sure either way, but I was just thinking of this as a really high level means of thinking about the ability of countries to wage war on each other, and I don't know that adding in PPP changes the bottom line much. Just my $0.02
Yeah it's a huge difference. Go to data.worldbank.com and compare the two metrics for countries like China. Russia's GDP per capita PPP is around $30k, but just $10kish non-PPP adjusted. Ukraine is $3700 non-PPP, $13k PPP. Reason for this is likely the energy factor. Ukrainians have to pay a lot compared to their incomes for heating and electricity.
Countries can also smurf their adjusted GDP per capita with subsidies and other policies because of the way that it's calculated, but that doesn't necessarily make it not useful since it's supposed to be a measure of purchasing power.
Am I stuck in soldier mindset if I stress my 'folk priors,' which find ample confirmation in the Russia-Ukraine crisis, and which remain crucial takeaways? See my list, below. I trust that readers can readily supply illustrations from the concrete history of the crisis.
a) It's complicated.
b) Most people don't think it's complicated.
c) Competition among States raises the stakes and intensity of decision-making under uncertainty.
d) The great man theory of history is half right.
e) History is the result of human action, not any human design.
f) Statesmen are prone to illusion of control.
g) Statesmen often overestimate the rationality of their enemies.
h) Statesmen often underestimate the rationality of their enemies.
i) Politics is about status.
j) People care a lot about status.
k) It's very risky to poke a bear.
l) Consensus about red lines is elusive in the shadow and crucible of war.
m) What is unthinkable today can become righteous tomorrow.
n) It's hard to see through the fog of war.
o) Social desirability bias compounds the fog of war.
p) War is hell.
Fine list of folk priors. But, John,
were you wrong? Did you think Russia would invade?
I did not; I thought Putin would think it would be a mistake to invade.
I'm busy trying to write up what I think I've learned.
Tom, Lacking field expertise, I didn't have a strong intuition; but wasn't surprised at Russia's invasion. I look forward to your write-up.
One thing I think I learned is that Russia isn’t particularly important economically.
Everyone at the company I work for was concerned about the impact of the sanctions, but when we looked at the numbers, we found that our revenue from Russia was trivial… and “trivial” might overstate it. The complexity and risk of navigating the sanctions regime, and the challenges of getting money out of the country given the financial industry sanctions, were much greater than simply cutting off all sales to Russia. This was surprising. I suspect everyone realizing “selling to Russia isn’t worth the hassle” is why you saw so many western companies simply stopping sales to Russia.
In contrast, I spent a good bit of time over the prior year trying to get trade licenses to sell to Huawei. Huawei was much more important economically than the entire country of Russia. By a lot.
Perhaps a corollary is that Russia seems more dependent on its energy exports than Europe is dependent on importing energy from Russia. I had thought Russia’s ability to cut off energy supplies to Europe was going to be an “Ace up Russia’s sleeve”. But it doesn’t seem to be playing out that way.
Given the above, I think people (myself included) need to be more thoughtful about what lessons we export from Russia to China. The interdependency of the Western and Chinese economies is enormous, even setting aside semiconductors and Taiwan. The consequences of a similar dust up with the Chinese would be extremely different than what we’ve seen here.
Semi-conductors. It seems that Neon gas is crucial in semiconductor manufacture as the etching lasers need it… Ukraine supplies 50% of neon. The gas is not difficult to extract from the atmosphere but it needs a lot of energy. Russia/Ukraine are energy-rich.
Russia supplies a large amount of the World’s fertiliser without which food production slumps, food prices go up. Fertiliser is made from natural gas of which Russia has plenty.
Society advance is based on ‘power’ - power that energy creates. Mankind started out as a primitive with little power, just fire, and advanced as his ability to produce power increased.
It takes a huge amount of power to send men to the Moon, huge amounts of power to build skyscrapers, bridges, smelt aluminium, produce food, distribute food and goods and much more.
The West via its Net Zero is determined significantly to reduce its ability to produce power, even relying on the randomness of nature - wind & solar - to provide it, unreliable and intermittently. The West already is reducing its output to reduce its use of power as it reduces availability of energy. That in turn will cause economic regression.
So the more advanced economic power wins? No the more energy rich, able to produce more power wins. That’s going to be Russia, China and soon India. There is no economic power, without energy power.
What should be learned is ‘power’ does not mean strength, it means ability to manufacture, move, construct, create/extract new materials, to do new power hungry things, new technology - advance.
The use of neon is a little more complicated than some have portrayed it as. There are options for dealing with shortages. https://www.youtube.com/watch?v=SwcCC3tKZ3E
I would suggest also that, given pressure, more energy resources can be developed and found. The shale revolution should be a teaching event. So should the innovations in production even in mature conventional oil wells over the last 15 years. The experts tended to be pessimistic about both of those technologies. But the pessimists have been correct about 'green energy,' which just involves turning lots of fossil fuels into a worse energy generation technology through a very roundabout process.
Can be developed? We already have them developed but we may not use them. Europe forbids fracking and now US Govt is restricting it. That’s my point. The West is in autodestruct reducing its power output whilst others are increasing theirs.
Yes, if Europe and the US allowed development of more fracking fields some of these problems would be alleviated. Same thing with more nuclear development and more uranium exploration and mining.
“ And I, for one, do not know what to make of it.” I wish more people didn’t treat a willingness to say this as some kind of character flaw. It’s like they confuse the category of “facts about the universe” with the category of “ethical principles.” Is it because they are so attached to specific applications of those ethical principles to specific facts that they can’t change the application when the facts change, because they feel like they are abandoning the principle?
Your excellent comment: "We should be asking ourselves about the psychological effect of nuclear weapons in the hands of an unpredictable autocratic regime. That could turn out to be by far the most important lesson to get our arms around" was flashing through my head when I heard about Biden's direct threat to Putin's future in power when the Russian has the biggest finger on the nuclear button in the world.
I was shocked by the stupidity and huge risk to the world of our president's off-the-cuff comments. He shut off Putin's option of declaring victory and going home with some paper promises in hand.
I hate to be the guy to point out the "what about" scenarios, but man, if Trump said that, they'd be invoking the 25th Amendment.
As it stands, "they" are effectively just saying, "pay no mind to that old fool". I dunno which is worse.
Fortunately, Putin knows about Biden's mental condition. But we'd still better get him in a straitjacket before he gets us nuked.
I guess you could say we further learned how little the president matters if nobody wants to listen to him.
We may have been taught many things. What "we" learned is yet to be shown.
I've often criticized your takes on the war, but I agree with this one 100 percent.
Edit to add: Yours is one of very few substacks I subscribe to, because although your opinions often put a frown on my face, you are open to a very wide swath of information and you synthesize it in lucid ways. I learn a lot here.
Although the current round of sanctions hasn't bitten the RU military yet, there is a case to be made that the earlier sanctions imposed in 2014 effectively reduced its technological capacity:
Kamil Galeev (@kamilkazani) Tweeted:
Annexation of Crimea was a major blow on Russian military industry. As Sverdlovsk Oblast minister of industry Sergey Perestorin admitted, Ural plants, including tank producing ones, started having problems with components supply immediately after 2014 https://t.co/k5tRAH8ozE https://twitter.com/kamilkazani/status/1507820004632268800?s=20&t=GMHVaf_36BI_1lTj3IOM8A
I learned I need to learn a lot more.
But while my Slovak wife is studying Ukrainian to better help some of the many Ukrainians here in Bratislava, I'm following lots of other folk.
A big thing learned is that far too little pundit effort was spent on analyzing Ukraine's military, as compared to Russia or NATO. I also learned about the hugely important early Ukraine actions of blowing up dams - to release flood waters - to create fields of mud. Forcing Russians to use limited roads rather than flat, muddy, fields.
I favored "No-Fly Zones" for a day or so, but now I'm sure it's a mistake. More anti-tank & Surface-to-Air anti-aircraft missiles and weapons (like Obama-Biden refused in 2014 but Trump started sending). The Ukrainians are willing to fight, and kill, for Ukraine. That can stop the Russians from winning.
I also learned I was right right right about Trump over Biden. Every single pundit who supported Biden is, ever so slightly, partly to blame for Biden's weakness. (Just as we Trump-supporters are partly to blame for his blowhard tweets.) I noticed, clearly, how Arnold avoids talking about the 2020 Biden-Trump question and whether any voters should learn anything from that.
I'm also sadly disappointed about how very very few Fantasy Intellectuals supported Trump - but I haven't yet made the effort to document them. I know Arnold voted ... present (essentially). I would think this crisis would show more folk that the lesser evil of two is sometimes really important. I pray Biden's loose lips don't lead to any nuclear slips; such an "I told you so" is too terrible.
We learned from the 2008 - 2020 recession that the Fed was prepared to accept below target inflation for years upon years. This might make us more willing to believe that it will accept above average inflation for years upon years. But that plus the post September performance certainly raises the risk.
I feel very suspicious that we are getting much beyond cheerleading from the MSM. I’ve heard a few experts like Samo Burja saying that mechanized artillery based warfare just takes a while. All the aside shouldn’t we be more worried about the ripple effects of food price spikes?
I don't see the economic balance favoring the West. Not by a long shot. Russia, China, and India alone are a majority of the earth's 11 billion people, and they're all on the other team (and have created a SWIFT substitute). They also have most of the manufacturing capability. Putting a sanctions "fence" around them gives them more consumers and a more capable economy. They will outgrow us for as long as the division lasts.
And of course, the party in power in the US is not even trying to stop it, because Biden, Romney, Kerry, Pelosi, and their sons are on Russian and Chinese as well as Ukrainian payrolls. They are Quislings and the media are in cahoots with them.
Arnold, I like your comment about you needing to get your arms around the nuclear issue. I for one like a concept you mentioned many years ago about the difference between institutions that are "hard to break" versus "easy to fix." Politically, the emphasis is always on "hard to break". In our current environment, risks associated with nuclear war are overwhelmingly couched in a context of "hard to break" (i.e., deterrence). Although this is absolutely a crucial and necessary perspective (after all, nuclear war would be horrible), the "easy to fix" avenue needs to be explored and implemented also. In other words, some resources should be dedicated to hardening the West, in the horrible event that nuclear war comes. There is currently almost zero effort dedicated to this (at least in the West), which I think is a mistake. Warfare of any type (be is conventional or nuclear) should be mitigated through layers, and civil defense is one such layer.
The US abandoned civil defense efforts when the cobalt bomb was invented. It effectively makes shelters useless, at least if the enemy wants them to be, because whoever sends a bomb can render the target area poisonous for as long as they like.
This policy has mostly not been talked about since the initial discovery because we don't want bad actors to think of it. But they will and have anyway.
It turned out that Fannie and Freddie had taken on too many low-quality loans, but that is in hindsight; I suggest that your criticism of these companies is an instance of Hindsight Bias. No one expected the Fed to mismanage monetary policy in 2008 to the extent that so many mortgage holders would be unable to make their interest payments (or would find it advantageous to default). Bernanke had promised Milton Friedman, "We won't do it again"; but, to everyone's surprise, he broke that promise.
> it seems to me that one thing we did not learn is that what matters in international conflict is GDP.
It probably makes more sense if you also think in terms of GDP per capita. Throw in population and it gives a useful parameter to think of things.
Russia's GDP is much greater than Ukraine's, but it's GDP per capita is relatively comparable. So for Russia to "win" by devoting its big GDP advantage to the war, it would have to throw many times the amount of resources at Ukraine as it currently is (because they're at near parity in committed military forces).
Even for an authoritarian country, devoting a lot of resources to "total war" seems politically difficult.
I think this can be seen in the US invasion of Iraq as well. The US had both an overwhelming GDP and GDP/capita advantage, it could get away with destroying the Iraqi regime by using only a fraction of its overall strength. Consider the hypothetical where the US' initial invasion had met dramatic and effective resistance. In that case, would the US have had the political willpower to double or triple the number of troops we committed to the war? Maybe, but if it required truly shifting a noticeable amount of resources away from BUTTER to GUNS, a lot of people would object.
So GDP by itself isn't a great determinant, but I think GDP per capita is probably a decent proxy for combat ability.
1. A huge GDP per capita advantage will let a country wage "wars of convenience" because it can wage war on weaker countries without forcing the consequence of redirecting significant amounts of total GDP to the war effort.
2. If GDP per capita is roughly equal, then the side that's more willing to commit all of its GDP to war probably has the advantage, not the side with the highest GDP.
(That is, this started out as a "war of convenience" for Russia. For Ukraine, it's seen as a "war of survival", so they're willing to commit basically their whole GDP to the effort. Perhaps their losses so far have made this a "war of survival" for the Russian regime as well, and because they do have a much larger GDP, they could win in this kind of "Total War" scenario, but it will require devoting a lot more of their economic capacity to the war effort than they have, so far, been willing to devote. Because, of course, it will be politically hard to do so).
I think this is a very important point people often miss, especially with regards to China. Sure, China has the biggest economy in the world, but they also have ~1/7th of the world's population working in it, which makes it a lot less impressive. A very productive economy allows for lots of stupid money pits and corruption in the government, and arguably external wars are mostly those sorts of money pits. You need a lot of slack to throw resources into a zero or negative sum game for a long period of time, and GDP per capita measures that slack a lot better than just GDP.
The assumption is that China's GDP/Capita is only what it is because it started being a real (non-communist) country so late. In another 25 years shouldn't we expect it to be putting up GDP/capita figures similar to other East Asian countries like Japan, Korea, or Taiwan.
This is kind of tangential, but I think it's going to be really hard to figure what happens in these countries because the /Capita part of the equation is going to be changing so dramatically.
Japan seems further along in this process, and they've had a very hard time moving to a country with a falling population. I imagine it might get a lot more messy for China, but I don't have any sense of how; just a general intuition that, like Russia, the traditional governmental solution of throwing mass quantities at a problem doesn't work as well when you no longer have limitless numbers of people
That is a poor assumption, however, as 1: China is still a communist country, only less so on some margins, and 2: being far less than free and very top down still there is little reason to expect continuous growth. The USSR had a burst of growth early on, then basically flatlined. That seems to be pattern with most countries: go from full on poor authoritarian, loosen up due to a newer and more efficient leader, get a boost of GDP growth for a few years as industries catch up to leading countries, plateau at the new higher level with low growth based on what freedom your government allows.
The US is almost certainly in the same position, just coming at it from the other side as it were. 2% growth is the norm only partly because we are close to the growth frontier (no catch up growth for us), the rest is built in inefficiencies and innovation requiring ever more regulatory permission to occur.
China seems to have gone about as far as it can go just by catch up growth and moderate liberation. The election of a dictator signals to me that they are nervous about internal stability and are focusing on maintaining control that they were losing over their upper class industrialists. They are not going to become less repressive, and will trade growth in the process.
All of the Asian Tigers were essentially authoritarian states to one degree or another for most of their history, especially their high growth phase. Japan, Korea, Taiwan, Singapore, all the same. Usually dominated by a single individual or party that won every election, to the extent elections were even allowed.
Nor did those governments stop from "meddling in the economy". Most had lots of economic regulation and industrial planning. Japan and MITI. Literal "four year plans".
It's certainly true that full communism is economic death. And its true that China could never use the government managed export driven growth model of those countries to the same degree because its too big.
But at the end of the day "authoritarianism" and government regulation are to a certain extent present in all societies (including our own).
My guess is that, given the IQ level of China, its still way below the gdp/capita you would expect. I don't know if they will get all the way to Japan, but I think they will grow faster then us over the next 25 years.
Up until your last paragraph, that was exactly my point... are you agreeing with me? Your tone seems to imply that you are not.
As to the last paragraph, I think IQ matters less than government policy, in so far as you can have a super high IQ country and still be very poor because the government is doing things that kill productivity. Measuring IQ is easy compared to government policy, so if IQ is high and productivity low, one should probably assume the government policies are bad, and without good reason to think otherwise will continue to be bad.
You seem to imply that China's GDP isn't going to grow far beyond where it is now, around $10k. But Japan is around 40k and Korea and Taiwan are 30k. I think it likely that China will achieve or come close to those levels, which is a big increase over where it is now. Some of this change could come simply by changing the exchange rate peg (PPP china is already $17k per capita).
At 30k per capita China would be vastly larger in total GDP than the USA.
I think IQ is the main driver of both economic growth and good government policy. Communism was ultimately a detour, but China has abandoned communism. It's mixed market just like everyplace else now. "Democracy" doesn't appear to be the main driver of economic growth so much as good courts and institutions, as shown by the economic growth of the un-democratic Asian tigers.
Why GDP per capita and not GDP per capita PPP?
I didn't spend the time to think it out. Do you think adding PPP would make a meaningful difference?
I'm not sure either way, but I was just thinking of this as a really high level means of thinking about the ability of countries to wage war on each other, and I don't know that adding in PPP changes the bottom line much. Just my $0.02
Yeah it's a huge difference. Go to data.worldbank.com and compare the two metrics for countries like China. Russia's GDP per capita PPP is around $30k, but just $10kish non-PPP adjusted. Ukraine is $3700 non-PPP, $13k PPP. Reason for this is likely the energy factor. Ukrainians have to pay a lot compared to their incomes for heating and electricity.
Countries can also smurf their adjusted GDP per capita with subsidies and other policies because of the way that it's calculated, but that doesn't necessarily make it not useful since it's supposed to be a measure of purchasing power.