Humanity’s Greatest Threat (2) - will the United States and China go to war?

Author: Songguobuluo @ Boss Gu, translator: Mr. Y

Before we talk about U.S.-China relations, I need to make one thing clear: if you want to seriously discuss “Will the United States and China go to war?”, you can’t just stare at trending news, you can’t just listen to politicians’ statements, and you definitely can’t get addicted to analyses that “look like they understand the military but are really just guessing”.

Why? Because wars never come out of thin air. Behind them, there are economic structure, interests and the accumulated pressure of institutional conflicts.

Once some things start moving, they are like a giant set of gears: personal likes and dislikes, emotions, and even a leader’s “personality” can only change the speed within a limited range but can hardly change the direction.

So, before we formally enter this topic, it is necessary to first introduce who Ludwig von Mises was, and to introduce the basic theoretical framework of his great book Omnipotent Government.

I will use the theoretical framework of this book to make a prediction about the future of U.S.-China relations.

Not a single part of this framework is “my own”; it is entirely due to a genius who is rarely noticed - the godfather and spiritual leader of the pre-war Austrian School, Ludwig von Mises - and his monograph, sealed away for 78 years, Omnipotent Government: The Rise of the Total State and Total War.

You might say: Huh? If we’re talking about the US and China, why bring in an Austrian School economist?

Don’t rush. Read through this whole chain of logic patiently and then look back at today’s international situation - you may be surprised to find that many conflict patterns you think are “new” were already described decades ago by a deeper theoretical framework.

The only difference is this: back then it was tariffs, quotas, and foreign-exchange controls; today it has become sanctions list, technology blockades, and “securitizing” industrial supply chains.

The names changed, but the essence did not.

1. Mises, the man and his books

Ludwig von Mises

In my mind, Mises is without doubt the greatest economist in history (no exceptions), and very possibly the greatest social scientist as well.

I know that sounds blunt, and it may even sound a bit crazy. But that’s what I truly believe.

As early as 1920 - even before the foundation of the Soviet Union - Mises, through his deep insight into value theory, predicted that a planned economy would inevitably bring poverty, production chaos, and economic collapse; and then about half of humanity spent more than 70 years of suffering adding a bitter footnote to his prediction.

Notice: this was not “he happened to guess right once”. In an era of extremely limited information and extremely intense ideological passion, he used theoretical reasoning to see the hard constraints imposed by institutions.

That level of insight deserves the word “genius.”

His monetary theory represents the peak of human intellectual achievement in that field; his research into money and credit helped him crack the business-cycle problem that had troubled humanity for centuries.

And he truly did predict the Great Depression of 1929 (not like a fortune-teller who blindly guessed and got lucky).

Let me add a quick complaint here: in history, there were far too many people who “bragged after the fact” that they had predicted an economic crisis. Many of them pulled out a vague old article after the crisis happened and said, “See? I told you so”. That is not prediction - that is fortune-telling literature.

Mises was different: his chain of logic was clear, and it was theoretically self-consistent.

Not to mention the comprehensive, coherent, and all-encompassing system of “Action study” that came from his profound research in economic methodology.

What makes “Action study” powerful is that it puts economic phenomena back at the root question of “how humans act?” On the surface, you seem to be discussing taxes, interest rates, wages, and prices; but in reality, you are discussing human choices, human motives, human constraints, and how institutions distort those choices.

Once you grasp the key variable of “action”, many “grand” narratives begin to reveal their cracks.

His small book written more than 70 years ago, Bureaucracy, resonates deeply with every older Chinese reader (for example, people who was born before 1960): readers feel as if he prophetically described the planned-economy society they had personally experienced.

It is that kind of “if you’ve read it, you just get it” experience: as you read, you can’t help nodding, and then you blurt out, “Isn’t this exactly what I saw back then?”

His masterpiece, Human Action, is a true “one book on a desert island”. This monumental work is worth reading dozens of times for anyone seeking the truth about human economics and society - and every time, you will learn something new.

Steeped in classical literature, Mises also wrote with Shakespeare-like elegance; his humor was top-tier, and his laughter threshold was very high. So, even in purely theoretical works, his sudden humor and refined sharpness often made readers burst out laughing.

That is extremely rare. Most theory books are either so serious that they make you sleepy, or they sacrifice rigor to be “fun”.

Mises was rigorous, and he could still write satire as sharp as a blade.

If you have never read his books, you are very lucky, there is still something that is good waiting for you. But once you have read his books, you are also unlucky, because your expectations and standards for reading will be greatly raised.

People who often read a high-level author like Mises find it hard to tolerate the countless street-stall that resemble vulgar fiction.

Other economists, in front of him, are like clowns swinging spears and twirling sticks -thinking in a childish and shallow way on a very low level.

Almost all the “popular” economists you know today, who became famous overnight, are destined to leave not even a single line in the history of economics.

But Mises, borrowing the wording from Shelley’s elegy for Keats, has “long taken his seat among the kings of thought”, forever placed in the pantheon of human intellect.

Anyone in later generations who wants true insight into society, economics, and politics must read his masterpieces - just as we still pass down the words of Aristotle from two thousand years ago.

Omnipotent Government is Mises’s book on the rise of Nazism, and it offers a political-economic-sociological explanation unlike anything you have seen before. And the explanatory framework in this book goes beyond the historical “uniqueness” of Nazi Germany and fits today’s international political conflicts extremely well.

But I want to add one reminder: don’t treat Omnipotent Government as a “history book”.

Yes, it discusses the Nazis, but what is truly powerful is that it abstracts a mechanism: how modern states go further in economic intervention and finally push conflict toward total war.

If you apply this mechanism to observe the escalation path of conflicts in any major power, things become very clear.

2. How Mises explained “why great wars happen”

In short, regarding the fundamental reason why Germans launched a great war, Mises believed that:

It was not because Germans had some national character of “overflowing martial virtue”.

In the history of every nation you can find both martial elements and elements that love peace.

It was not because of Hitler’s insane will and personality. If it had not been Hitler but someone else, it would not have changed Germany’s overall trend at that time.

And it was not because of the Nazis’ special anti-Semitism and racism.

This is merely a unique characteristic added to history by the Nazi Party's particular preferences; the Nazis themselves did not even consistently implement their racist ideology.

Rather, it was because economic interventionism, by Germans (and by all the great powers of that era), produced economic nationalism; economic nationalism piled up barriers to international trade and intensified international conflicts, making most Germans sincerely believe that invading other countries was closely tied to their own interests.

Economic interests dragged countless ordinary Germans into the chariot of total war.

Please note that there is another extremely important point here that is often overlooked. You cannot mobilize an entire nation for war with “propaganda slogans” alone.

If you want ordinary people to endure rationing, endure poverty, and even send their sons to the battlefield, you must give them a harder reason: “This is about your family’s livelihood.”

This is exactly what Mises was talking about: when economic nationalism makes interest conflicts concrete, invasion starts to look like a “justified and necessary” self-rescue plan to many people.

Economic nationalism is the real key to international conflicts and disputes. And the logical chain from economic nationalism to war had already been revealed by classical economists:

When property is protected, and the government adopts a laissez-faire attitude towards the market, everyone must serve other people’s interests in order to serve their own. In the market economy, to get what you want, you must provide what others want; anyone who wants to get rich must work hard to provide fellow citizens with high-quality goods and services at good prices; and everyone will use the factors of production in the way they think best, so that efficiency reaches the highest possible level.

Simply put, in a free market, the long-term interests between people are harmonious, and the economy can achieve the best possible outcome under the limits of resource endowments and technology.

But if the government does not leave the economy free and instead restricts how market entities use their own property, intervention appears.

Intervention can take many forms: regulation (not allowing something), restricting production (monopoly, quotas, raising entry barriers), taxation (raising production costs), excessive money supply, and so on.

The consequence of intervention is that, under the same conditions, factors of production cannot fully serve humanity.

Intervention always lowers productivity and pulls down the overall standard of living. Let me add a more colloquial explanation here:

the most common effect of intervention is to hide the “real costs” and cover up the “real scarcity”, making you think you are protecting a certain group, while in fact you are dragging down the efficiency of the whole society.

Once efficiency drops, the cake becomes smaller, and the conflict over dividing the cake becomes fiercer.

It takes sustained focus and a meticulous, logically consistent, and clear mind to grasp the true principles of economics.

However, it is relatively easier to draw correct economic conclusions through economic practice. You can say that although classical economics from more than two hundred years ago and modern economics do not share the same theoretical foundation, the answers they arrive at in economic practice are consistent.

The doctrine of applying economics in practice can be summarized in one sentence:

If the government grants privileges (to unions, business cartels, licenses, agricultural subsidies, credit subsidies, and so on) and extra benefits to one group, then some other people will always pay for those privileges and benefits; if the government grants different privileges to all groups, then no one benefits; instead, everyone suffers, because overall productivity is dragged down.

In plain words: if you open a back door for one person, someone else must pay the cost; if you open back doors for everyone, then in the end everyone falls into the pit together, because the system smashes efficiency.

2.1 How Germany’s “intervention spiral” was built step by step

In Germany more than 80 years ago, because social democracy was flourishing, such privileges were first granted to the working class.

These manifested as wages for workers that were higher than those determined by the market. At that moment, those who suffered losses were the business owners who paid their workers' wages.

Because labor costs in the industry rose; if other costs and revenues stayed the same, profitability would inevitably be damaged.

The business owners who suffered losses would not accept that quietly; they would use their political networks to seek privileges of their own.

So the German government further granted privileges to business owners, namely, “cartels”.

Cartels raised entry thresholds in industries or built policy barriers to block potential competitors, with the goal of letting cartel owners sell their products at prices higher than the market rate.

This compensated for the piece of flesh that labor cost had cut away from them. But who paid for the business owners’ privileges? Obviously, consumers.

The result of restricting production was this: consumers had to pay higher prices for the same product, or prices stayed the same, but quality got worse.

And the broad mass of consumers is you and me.

Consumers are not easily able, in modern society, to form political pressure groups like workers or entrepreneurs. They cannot shift the losses caused by compensating business owners onto other groups through political privileges.

But the story did not end there. If international trade existed, the German government’s domestic interventions were bound to crash and fail.

This part was actually like a “chain debt” in an institutional version:

First, you used the company's money to subsidize the workers, and the business owners were unhappy; then you used the consumers' money to subsidize the business owners, and the consumers were unhappy; the consumers had no organization, so in the end they could only suppress their anger.

But international trade existed, and consumers still had the chance to “vote with their feet”, they simply bought imports.

So the domestic structure of “using one privilege to patch another privilege” collapsed. As long as international competition existed, the sky-high prices created by unions and cartels would not be the only quote. 

Similar goods from other countries, for example, cars, would be cheaper than Germany’s cartel price at the same quality. So German consumers did not need to grit their teeth and pay cartel-level car prices; they just bought imported cars.

Buying imports instead of domestic cars was a veto vote against an inefficient domestic auto industry.

German business owners then had to face falling sales, shrinking profits, and therefore shrinking capacity; German workers had to earn lower wages in inefficient companies. And if foreign competitors were thriving and highly competitive, those protected companies might even go bankrupt, and those workers might even lose their jobs.

At this point, we arrive at Mises’s key observation about interventionism: the “intervention spiral law”.

Any intervention will only backfire and frustrate the government, as it will create new problems that the government does not want. To solve those new troubles, the government either introduces new interventions; just as after giving privileges to workers, it then gives a new privilege to business owners to compensate them, or it abolishes all interventions completely.

When a government must keep intervening, it gradually moves toward a planned economy: all production and sales must be fully controlled by the government; otherwise, it is always “press one gourd down and other float up”, and the “unruly” market keeps making trouble for a “well-meaning” government.

Giving up intervention means returning to a free market and submitting to the ruthless laws of economics.

As long as policy thinking is logically consistent and policies are not contradictory and chaotic, you must choose one of the two paths.

In plain terms: once you step onto the road of “intervention – patching - more intervention”, you either go all the way until you kill the market (full planning), or you admit “Fine, I’m done pretending.” and return to the free market.

That middle state of “wanting this, wanting that, and wanting everything” is the most painful, and the easiest way to push society toward extremes.

As explained above, the mere existence of international trade competition exposes the harmful results of Germany’s domestic interventions. The “intervention spiral law” stood before the German government once again: either control international trade, or abolish all the previous interventions.

Sadly, like the other great powers of that era, Germany chose to intervene in international trade.

Since imported goods won by being good and cheap, then I would make them not so good and not so cheap, so that German national industry could compete with imports. The method was simple: raise tariffs to raise the price of imports, or directly restricted or even banned buying imports, this was importing quotas and foreign-exchange controls.

You could also devalue the exchange rate of your own currency to make imports more expensive. The struggle between domestic merchants and foreign competitors became a life-or-death, irreconcilable conflict.

Economic nationalism was born from this.

After all measures to intervene in international trade were used, not only imports but also Germany’s exports became more difficult. The reason was simple: people export to import. At the most fundamental level, imported goods are actually paid for with exported goods.No one wants to hold Germany’s domestic currency for the long term.

Demand for the Germany Mark existed only because, at some not-too-distant time in the future, people wanted to use Marks to buy German goods. When Germany imported less, it also exported less.

Second, and more importantly, countries outside Germany also wanted to take care of their own unions, cartels, and similar groups, and they too foolishly stepped into the intervention spiral step by step.

Other countries also worked hard to build trade barriers tower!

This was the main background of the world economy on the eve of World War I and World War II.

As international trade shrank and countries’ dependence on trade kept falling, the “price” of war dropped rapidly.

However, although the causal chain above applied to almost all major powers before the war, it could not explain why Germany, specifically, launched the great war.

So, what was Germany’s special factor?

Germany’s special factor was still economic.

Germany was an industrial, manufacturing-led country with “surplus population”; by “surplus population”, I mean its population-to-natural-resources ratio was far higher than that of other major powers.

In other words, Germany’s economic structure mainly produced intermediate goods and industrial products, exported them, and used that exchange to obtain the raw materials and food necessary for industrial production.

When international trade was blocked by various barriers, Germany’s production system faced collapse. When Germany exported finished goods and intermediate products, it hoped trade barriers would protect its national industries; but other countries would retaliate with the same trade-war tools - that is, making it harder for Germany to import raw materials and resources.

A nightmare choice stood before the Germans again: to obtain essential industrial raw materials and food, either Germany would tear its own politics apart, offend all previous pressure groups, abolish all privileges and all measures that interfered with trade, and return to the international market as a free-trade actor; or it would turn other countries that possessed raw materials and food into its “domestic territory” and seize “living space” for the German nation.

The second path was the Nazi road of invasion and militarism.

At this point, Germany’s second special factor came into play.

In analyzing the reasons why Germany launched the World War, Mises emphasized a reason that sounds almost like nonsense: the Germans launched the world war because they believed that their military strength was sufficient to win the world war.

This was a necessary condition for launching war. Small weak countries that adopted interventionism must face the bitter results of intervention directly. If they wanted change, their weak military did not allow them to turn other countries’ territory into “their own”, so they had no choice but to submit to the free-trade rules of the market economy.

But Germany’s strong military power gave Germans the option of reckless militarism.

This was the social, political, and economic root that Mises provided for the rise of Nazi Germany.

This chain was simple:

1. Intervening in the domestic market alone was not enough, because the law of prices operated ruthlessly; once there was international competition, domestic intervention policies woud inevitably fail.

2. Therefore, intervention and control must extend into the international sphere where you did not have sovereignty, and economic nationalism was born.

   
   

3. Intervention in international trade and protectionism brought hostility and retaliation from other countries.

4. Countries built trade barriers against each other, causing international conflicts of interest and lowering the cost of war.

5. For a manufacturing power with surplus population, Germany, once it could no longer use free trade to obtain raw materials and food, the only way out was to use “iron and blood” to seize raw materials and food.

6. The economic interests of the German public across industry and commerce then clicked with politicians’ militarism; invasion gained a popular foundation, and total war began.

Note: this causal chain did not apply only to Germany; the major powers in World War I and World War II all enjoyed themselves in the intervention spiral. This fully explains the economic causes of world war.

And economic motives are the most important motives in social phenomena: they are real, they are tied to every ordinary person, and they best explain why billions of civilians threw their flesh and blood into those wars.

Otherwise, we would have to rely on forced and off-target explanations: that some nations, or their ideas, had martial and conquering blood flowing in them; or that humanity went collectively mad and some bloodthirsty genetic switch was mysteriously turned on; or that world wars were caused by the accidental diplomatic failures of a small group of powerful politicians.

3. Will the United States and China go to war?

I spent so many words introducing Mises’s book because almost every link in the chain above precisely maps onto today’s international situation.

Next, let’s answer the question everyone cares about most: will the United States and China go to war?

In the immediate vicinity, the war refers to the Taiwan Strait; in the long term, it refers to the increasingly fierce overall confrontation between the United States and China.

Here is the answer first: looking at the current big trend, whether near or far, the United States and China are not very likely to go to war!

But I must clarify this is about the big trend and the higher probability; on the other hand, once you are talking about human actions, you cannot make precise predictions. Across all times and places, we have never found even one person in history who could precisely predict an event, clearly explain the predictive logic, and then use that same logic to predict all similar events.

But there have been plenty of “after-the-fact geniuses” and plenty of scammers who guessed wildly, happened to be right once, and then built their bragging capital from it.

So, what supports my judgment that war is unlikely to occur?

The reason is simple: trade is the true ballast stone of peace; closing the country and relying on self-sufficiency reduces the cost of war.

And China’s economy has a relatively high dependence on international trade (whether between the mainland and Taiwan, or between China and the US).

China is the world’s largest trading country: it not only trades with almost every country in the world, but is also a important trade partner for many countries.

China exports manufactured goods like clothing and electromechanical products to the rest of the world and then buys back resources like iron ore and oil from other countries.

After raw materials arrive in China, they are turned into products and circulated around the globe; China has become a true “world factory” and a major manufacturing power.

These countless threads of trade raise the cost for China to participate in a full-scale war. The order cancellations, trade decoupling, and embargoes that come with war would, in the short term, flood China’s economic system with shortages and chaos - until it stalls.

Take chips as an example: China is the world’s largest consumer of chips. According to China Customs statistics, the total value of China’s integrated circuit imports in 2024 reached as high as 385 billion U.S. dollars.

The US holds the most high-end “design” segment of the chip supply chain; if the US bans chip sales to China, what would happen? What will happen is this: the US, trying to choke China with chips, will be choked by rare earths (and this scene was already truly played out in 2025).

Nearly 40% of the world’s rare earths are stored in China; and the US has almost no domestic rare-earth production capacity, relying 100% on the outside world, of which nearly 80% of U.S. rare earths come from China.

Try to imagine the consequences and economic costs if both the US and China became self-sufficient and even went to war.

If you can’t imagine what it looks like when trade were disrupted, war broke out, and countries tried to rely on self-sufficiency, just look back at the social and economic conditions during the COVID-19 pandemic when states closed their borders.

You don’t need imagination; reality has already put you through a "stress test”.

What’s more, in China, one quarter of jobs, about 200 million people’s livelihoods, are created by foreign trade. War would at least, in the short term, destroy the income and life of these 200 million people and their families.

These public opinions that involve real economic interests are truly powerful and influential. These people are naturally the foundation of anti-war sentiment.

A village blacksmith does not want to fight with the baker unless he plans to starve, or unless he can grow grain and bake bread himself.

The greatness of the market economy is that it requires people: if you want to get, you must give; it requires division of labor and cooperation and interdependence between people, industries, and countries.

In a pattern of interests where “you rely on me and I rely on you”, it is hard for people to start fighting.

Even the most brutal and bloodthirsty thug, if he does business, will become polite and restrained; nothing cultivates civilization better than the market economy!

4. War or peace?

Peace does not come from anti-war propaganda and does not come from hollow international treaties and agreements that can become scrap paper at any time. Peace comes from an exchange mechanism: for each person to better take care of their own interests, they must first take care of other people’s interests.

Before World War I, when trade barriers had not yet paralyzed international trade among Western European countries, a ship loaded with German goods departed from the North Sea, heading to Britain; and the ship and its cargo were insured by a British insurance company.

Facing such a structure of interests, Germans and Britons held hands and firmly believed the two countries would not go to war.

Their optimism is not unfounded as long as trade continues.

Before World War II, Hitler and his party were obsessed with economic self-sufficiency. To prepare for a future war without relying on imported foreign raw materials, Germans worked hard to achieve “domestic substitution”. They developed some low-quality synthetic silk and synthetic rubber…

Compared to the US and China, Russia has a much lower threshold for war because its dependence on international trade is low (in 2021, the total trade volume between Russia and the US was only 34 billion U.S. dollars).

Since the 2014 Crimea conflict, as Western countries imposed economic sanctions on Russia (in essence, trade decoupling), Russia has grown increasingly distant from the international market in economic affairs.

Even so, if Europe did not depend on Russia’s oil and gas resources, you can imagine that today’s Russia-Ukraine war would be even more brutal. Trade links such as the Nord Stream pipeline prevented Russia and the West from completely tearing apart and entering an even more bottomless fight.

Let me repeat: This judgment of the overall trend cannot erase the randomness of history, nor can it erase the possibility of accidental clashes.

And analyzing economic trends is not the same as economic determinism. It recognizes that the unique personality of key figures at the center of history’s whirlpool may completely reverse the trend.

If I must give an experience-based standard to judge that war is about to break out soon, I think the most reliable one may be short-term international capital flows.

Unlike politicians’ vague and foggy statements, and unlike military commentators’ guesswork, sudden changes in short-term international capital represent adjustments in the structure of national interests.

Even if we assume that a highly confidential war is being planned, so confidential that no private capital can withdraw early based on inside information, modern international financial markets are full of state-owned capital; in short-term lending markets, these funds either represent what the home country owes to foreigners, or what foreigners owe to the home country.

If a great war is coming, even just to collect foreign exchange to sustain war spending, decision-makers have strong incentives to withdraw overseas creditor funds in advance.

It is not surprising that on the eve of World War I and World War II, the first people to notice something abnormal were financial elites in various countries: before the wars, governments of major powers such as Russia, Germany, and France were desperately collecting gold and pulling back short-term foreign investments.

Therefore, whether the United States and China will go to war does not depend on trending slogans and loud talk, but mainly on the economic structure of both sides.

When governments, out of “good intentions” to protect the interests of part of its citizens, keep repeating the spiral of “intervention-patching-more intervention” and distorting the market, the interest conflicts between the two countries will become institutionalized and nationalized, which in turn raises trade barriers and confrontation emotions, and finally pushes conflict toward the dangerous edge of “total war” - this is exactly the logic chain Mises revealed in Omnipotent Government.

Therefore, it cannot be overstated that trade and the division of labor are the most solid guarantees of peace.

The deeper the interdependence, the higher the cost of war; and the more likely it is that the real interests of most people in the world will be gathered into an anti-war force.

Real hope does not come from empty declarations and pale treaties, but from open trade, mutually beneficial cooperation, and an idea and institutional structure in which anyone who wants to live a good life must also be able to let the other side live a good life; as long as this structure is not completely destroyed, peace still has a solid point of support.