William Jefferies is Senior Lecturer at SOAS University of London and author of the recently published War and the World Economy: Trade, Tech and Military Conflicts in a De-globalising World. Green Left’s Federico Fuentes spoke to Jefferies about the growing confrontation between the United States and China. This is the second in our two-part interview. Read part one here.
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The economies of the US and China are more integrated than ever. Does that rule out the kind of great power rivalry Lenin wrote about? Or is open war a possibility?
The US certainly thinks war is a possibility — they are planning for it.
The US Air Force’s research and development institution, the RAND Project AIR FORCE, has done modeling that estimates there could be a war over Taiwan in the 2020s. We are already in 2025.
In 1914, [Karl] Kautsky published a very poorly-timed pamphlet on the eve of World War I called "Ultraimperialism". He argued a war between imperialist powers was impossible because of their close economic relations.
So, the idea that countries are too closely integrated to go to war is not new. In fact, it is precisely because they are so closely linked that we see issues over how to resolve differences between them.
There is no world court that can adjudicate over who gets the biggest share of the surplus value sloshing around the world economy. The only way to decide this is through economic and military conflict — it is the only way capitalism knows.
This takes us to the contradiction that is rooted in the nature of the US and China’s mutual dependence.
While globalisation and the transition of the Soviet Union and China to the market bolstered the West, it also set in train the process of deindustrialisation and subsequent rise of China.
As the US deindustrialised, its industries moved to China, where it was cheaper to produce, and exported back what they had previously made in the US. These companies also repatriated profits back to the US and Europe.
This process led to the rise of factoryless goods producers (FGPs), such as Apple, which outsource their entire production. Apple makes 98% of its iPhones in China, but it only has 14,000 direct employees there.
These employees simply supervise the contract manufacturing services (CMSs), that is, third-party manufacturers who produce the iPhones for Apple.
How do these FGPs maintain control over production? Via what Stan Shih, founder of Taiwanese tech company Acer, calls the “smiling curve”.
The idea of the curve is that at one end you have the inputs (chips, high tech components, etc), which are owned by Apple, Intel, etc.
Then, at the bottom of the curve, you have companies such as Acer, which simply assemble components.
Finally, at the other end of the curve is controlling access to rich Western markets, which are controlled by the FGPs.
The end result is a smiling curve, in which FGPs reap the profits through their control of technology and access to markets, while producers hardly make any money at all.
This is unnatural under capitalism, because the producer is the most important part. Moreover, as Karl Marx explained, given the tendency of profit rates to equalise, profits tend to flow to nations with a higher organic composition of capital.
Today, that is China, because it has more factories, more industrial robots, more everything. China is more efficient, has a higher productivity rate, and therefore can sell its output at a slightly lower price.
But most of the main FGPs are US-owned.
True, the main FGPs are still owned by the US. But China wants to replace them with its own brands: Huawei, ZTE, OnePlus, etc. That will take time, however. It cannot happen instantly.
In the meantime, Chinese brands seek a bigger slice of the profit pie because capitalists always want the biggest possible slice. The higher composition of capital always wants its bigger slice of profits to reflect the investments it has made.
That is why China seeks to move up the technological curves to control inputs (produce its own high tech components) and outputs (sell to a greater variety of markets).
That is also why the US seeks to defend the smiling curve by investing in high tech and applying tariffs. But that will not work because, in the end, the producer has the power.
The West produces so little, it is now completely dependent on Chinese imports. The West can threaten tariffs, but ultimately there is nowhere else to buy iPhones from than China. That is why consumers, not China, will end up paying the tariffs.
Hence the conflict: China wants a bigger slice of the pie to reflect its role in global production, the US wants to maintain its slice from the rate of interest. That contradiction needs to be resolved.
Therefore, conflict is inevitable. Will it end in war? I obviously do not know — hopefully not. I am not saying there will be a world war — even if US analysts are. But I am saying there will be conflict, and it will not end well.
Given what you say about China, can we define it as an imperialist power? You seem to prefer calling it a “great power”.
You have to be careful with the term today. When Russia invaded Ukraine, British foreign secretary David Lammy was quick to call Russia an imperialist power.
The term is used by the West as an insult against anyone they disagree with. Everyone is imperialist according to them — except, of course, the West.
So, I refer to China as a great power instead, as it is more ambiguous. But the issue is not really that ambiguous. If you go down Lenin’s five criteria of imperialism and ask whether China fulfills them all, you can only really answer yes.
Furthermore, China’s economy is nearly as big (or bigger, depending on how you measure it) than the US economy, is home to the second largest number of multinational companies in the world, and has US$6 trillion worth of foreign assets.
China also has the world’s second largest army and a huge war potential.
Lord Nicolas Kaldor did a study after World War II to estimate Germany's war potential. He said war potential could be calculated based on the sum population plus industrial power.
If we compare the US and China, we see that the US has about 15 million manufacturing workers, while China has about 240 million industrial workers. China is adding about 300,000 industrial robots a year, the US is adding about 35,000 a year.
China represents about 60% of global shipbuilding, the US makes about 0.2% of the world’s ships. If China devotes just 1% of its shipbuilding resources to its military, that is three times more than what the US can build.
This is what you have to consider when thinking about war potential. US military power is enormous, there is no doubt. But, in the end, your industrial capacity determines your military power.