Ray Dalio

Ray Dalio: The Ideological War Of Comparable Powers In A Small World

People need to stop calling the conflict between the U.S. and China a trade war because that term is misleading. It is an ideological war of comparable powers in a small world. In other words, it is not nearly as much about trade as it is about 1) two different approaches to life that extend to different approaches to government, business, individual behavior and global geopolitics, with 2) China emerging to be a comparable power to the U.S. now and in the not too distant future a greater power in a small world in which these two countries will be bumping into each other in all sorts of ways. While these two countries can negotiate their trade issues away they can’t negotiate these more fundamental issues (i.e., their approaches to life issues and the comparable powers bumping into each other issues). These fundamental issues – such as how companies relate to governments – are at the heart of the “trade” dispute and where the stumbling blocks lie and will remain.

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Ray Dalio

One would be naive to expect the Chinese to approach life differently than they have approached life for thousands of years (which is what they refer to as “with Chinese characteristics” which is at its heart their Confucian, family-like top down way of being) one shouldn’t expect Americans to approach life differently from how they approached it for nearly 250 years (which is individualistic, bottom-up and democratic). These different ways of being affect the ways the leaders of these two countries believe relationships between governments, businesses and individuals should be. The boundaries of these were pushed in the “trade war negotiations” which is what led to the “trade talks” breaking down, at least temporarily.

Also relevant to these negotiations is the fact that time is on the Chinese side (because they are getting stronger faster than the U.S.) so it is in the interest of the U.S. to have any wars/confrontations that might happen earlier and it is in the interest of the Chinese to have them later. Also noteworthy, the U.S. and China have different approaches to wars/confrontations. The Chinese approach is to try win without fighting by quietly building one’s power and then showing it to one’s opponent so that the opponent will give up without fighting, while the Western approach to fighting (which some Chinese leaders believe has evolved from how Mediterranean/European cultures evolved) tends to be more like animals do via exchanging harmful blows, hurting both, until one submits to the other. While the Chinese have an aversion to this type of war because it’s so terrible, they will do it if pushed to do it. In other words the Chinese preferred approach to “wars” is to do them more as a competition to build strength which the Chinese do in a top-down Confucian sort of way, but they will fight in a tit-for-tat exchange of blows way if pushed. That is what we are now at the brink of.

In any case, this will be a long ideological war with the outcome being primarily dependent on how well these different ideological approaches produce the various types strengths — i.e, their educational, economic, social, technological, financial and military strengths— that are needed in order to be great world powers. Regarding where that competition will lead, I can envision either a) good outcomes if these two countries’ leaders treat this competition like other great competitions that make both sides stronger and if both sides realize that win-win competitions are much better than lose-lose wars, or b) terrible outcomes if these two countries’ leaders fight to make the others make existential changes that they will fight against. Once again, as with our domestic conflicts, the biggest question is how the people who have their hands on the levers of power will be with each other. That will significantly influence just about everything in our lives.

Article by Ray Dalio, LinkedIn Pulse

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