Manufacturing in China has long supported the relatively high standard of living of millions of U.S. residents while helping U.S. corporations profit handsomely. Apple, Tesla, General Motors, Nike, Texas Instruments and Qualcomm have significant manufacturing operations in China. Meanwhile the Chinese government invests in U.S. Treasury and government agency bonds, having purchased about a trillion dollars’ worth over the last decade.
Despite these benefits for the U.S. economy, Defense Secretary Lloyd Austin has stated that China remains the top challenge to U.S. national security interests. According to Assistant Defense Secretary Ely Ratner, major upgrades including new war ships and ballistic-missile submarines, attack helicopter squadrons, and an artillery division headquarters in the region will make U.S. forces more mobile, more distributed, more resilient and more lethal.
In his May 2023 testimony before the Senate Appropriations Subcommittee on Defense, Secretary Austin said the following:
This is a strategy-driven budget — and one driven by the seriousness of our strategic competition with the People’s Republic of China. At $842 billion, it is a 3.2 percent increase over Fiscal Year 23 enacted, and it is 13.4 percent higher than Fiscal Year 22 enacted. This budget will help us continue to implement our National Defense Strategy and the President’s National Security Strategy. The PRC is our pacing challenge. And we’re driving hard to meet it. Our budget builds on our previous investments to deter aggression. We’re investing in a more resilient force posture in the Indo-Pacific and increasing the scale and scope of our exercises with our partners. And this budget includes a 40 percent increase over last year’s request for the Pacific Deterrence Initiative and it’s an all-time high of $9.1 billion.
To some extent the Biden administration’s approach to China has focused on economic policy. The Department of Commerce’s ban on the sale of advanced semiconductors to China, announced in October 2022, is one key example. The CHIPS and Science Act, sharply increasing U.S. federal investment in domestic manufacturing, is another. Although these moves have military implications, they are primarily economic policy initiatives.
On the Republican side, Elbridge Colby, deputy secretary of defense for strategy and force development in the Trump administration, has written The Strategy of Denial in which he explains the extreme likelihood of war over Taiwan, which would require the U.S. to go to war to prevent China from dominating East Asia. He also notes the risk of nuclear war. Colby writes in The New Yorker that “[Sen. Josh] Hawley had denounced Big Tech for its alleged willingness to sell out to the Chinese government, [Sen.] Marco Rubio has focused on China’s persecution of the Uyghur Muslims, and [Sen. Tom] Cotton has promoted a targeted decoupling from China’s economy.”
Moreover, Republican House Foreign Affairs Committee Chair Michael McCaul is advocating for joint U.S.-Japanese war games in the event of possible nuclear arms use by China. Noting that China is in the process of more than tripling its number of active-service nuclear warheads and China’s subversion activities inside of Taiwan, McCaul is another powerful voice pushing preparation for war.
If the economic relationship with China is indeed beneficial to the U.S., why are so many of our national leaders intent on launching a new cold war with China?
The Defense Industry Drives Cold War Policies
There are multiple, very powerful interests that shape U.S. policy in the interests of corporations. These include auto manufacturers, the fossil fuel industry, the pharmaceutical industry, corporate agriculture and food processing, hospitals and health insurance. Though sectors of these industries have opposed particular policies, as in the recent debate over solar panels, in no case have the representatives of these industries called for intensifying military preparedness. The biopharma industry is concerned about weak intellectual property and patent protection in China, but they are not calling for a military response.
Unlike these other industries, defense contractors and the military-industrial-congressional complex depend on escalation and conflict to profit. After the fall of the Soviet Union, the “war on terror” provided new markets for certain sectors of the military industry, including those funded by Homeland Security, such as small arms, cybersecurity and a wing of Pentagon operations overseas.
But even the defense industry couldn’t claim that intercontinental ballistic missiles, nuclear warhead-armed submarines or B-1 bombers are effective in the war on terror. These big-ticket, multibillion-dollar products require big-ticket enemies. Thus, after a period of thawed relations with the U.S., both Russia and China are once again being presented to the U.S. public as enemies.
Currently planned big-ticket items include continued development and purchase of F-35 fighters, replacement of the silo-based ICBMs, purchase of new nuclear weapon-armed submarines, upgrading of B-1 bombers, and development and purchase of a new sea-launched cruise missile. The $882 billion recently approved by Congress for national defense already represents some 52 percent of the proposed 2024 discretionary budget. Currently planned purchases total well above a trillion dollars over the next two decades, paid for by taxpayers. Nuclear weapons alone are estimated to cost $634 billion through this decade. This represents an extraordinary transfer of wealth from hundreds of millions of U.S. taxpayers, to a few dozen large corporations and their executives.
In fact, this is a brilliant business plan: a guaranteed market, since the government buys all of the products; a monopoly arrangement, since foreign manufacturers are barred by law; guaranteed profits, because of congressionally authorized cost-plus contracts; and guaranteed payment, since taxpayers provide the money. Of course, it does require convincing a sector of the public that these expenditures are responding to threats to national security.
The enormous lobbying effort by the defense industries to expand the North Atlantic Treaty Organization has been relatively well documented. However, the pressure for remilitarizing our relationship with China is more recent. For example, the Pacific Deterrence Initiative that Secretary Austin described above involves selling three nuclear-powered submarines to Australia. The $15 billion cost will enrich Lockheed Martin, Boeing, Raytheon, Northrop Grumman, General Dynamics, and other large defense contractors. Of course, given the revolving door between the Pentagon and major defense contractors, government policies generally reflect the interests of the contractors. Secretary Austin himself was previously on the boards of United Technologies and of Raytheon.
U.S. civilian and military leaders, and leaders of the defense industry want propaganda campaigns that promote fear and aggressive response toward China. Military corporate political donation strategies favor influential legislators and promising candidates who will join and lead the congressional chorus calling for preparations for a probable war with China.
The specifics are fleshed out in several hawkish think tanks cranking out recommendations to Congress, including the Carnegie Endowment for International Peace’s “China Risk and China Opportunity for the U.S.-Japan Alliance Project,” emphasizing Japan’s role in countering the China threat, as well as an April 2020 report by The Atlantic Council’s Scowcroft Center for Strategy and Security on “Emerging Technologies and the Future of US-Japan Defense Collaboration,” arguing for Japanese and U.S. military cooperation to confront China.
Of course, this hawkish U.S. policy in turn compels China to prepare for war with the U.S. Now that the U.S. propaganda campaign by these politicians, generals and military contractors has prepared the public and organized think tank and media support, the cycle has begun. China is rapidly multiplying its nuclear weapons forces, expanding its other military forces and attempting leadership in cyberwarfare and artificial intelligence-assisted warfighting. Once this cycle fully prepares each party for war with the other, war becomes increasingly inevitable.
One of those keeping this wheel turning is Eric Schmidt, AI tech investor and former Google CEO. He has a plan for the U.S. to save itself from the “existential threat” posed by Chinese AI. Schmidt sits on the government commissions responsible for recommending how the U.S. can top China’s AI, while also benefiting financially from the resulting government contracts.
Between 2016 and 2021, Schmidt chaired both the Defense Innovation Board and the National Security Commission on Artificial Intelligence. In just one of several striking examples, during his chairing of these commissions, Schmidt’s venture capital firm, Innovation Endeavors, invested $150 million in software provider Rebellion Defense, in two rounds in 2019 and 2021. While Schmidt still chaired the National Security Commission in 2020, Rebellion was awarded $950 million in contracts from the Air Force for an AI cloud “advanced battle management system.” Schmidt donated $1.15 million to Democratic candidates and party organizations in 2022.
This hawkish coalition often does not advocate overtly for war, just advise that the U.S. “prepare for it.” For example, Global Guardian, a leading security firm with government and corporate clients in 130 countries, directs businesses to prepare to protect their people, assets and supply chains by decoupling from China. U.S. Air Force Gen. Mike Minihan told the 50,000 under his command in January 2023 that he had a gut feeling that the U.S. would be at war with China by 2025.
Perhaps he took a page from Global Guardian. In 2022, CEO Dale Buckner predicted Beijing may attempt to take Taiwan by force around the time of the island’s presidential elections in 2024, which could provide a trigger for a Chinese attack, saying there is a “90 percent chance of escalation from now over the next five years.” Buckner, a former Army Green Beret, also told Forbes, “It’s not paranoid to say we’re decoupling from China.”
In spite of the supply chain problems, particularly in computer chips, that war with China would entail, the top executives of Lockheed Martin and Raytheon Technologies seem unfazed, being dazzled by the enormous profits that preparation for war with China promises. For example, Raytheon CEO Greg Hayes noted in early 2022 that “the tensions in Eastern Europe [Ukraine], in the South China Sea [Taiwan], all of those things are putting pressure on some of the defense spending over there. So I fully expect we’re going to see some benefit from it.”
After many years with no military basing rights, the U.S. has just secured extensive basing rights in the Philippines. The recent deal to provide Australia with nuclear-powered attack submarines signifies a significant move away from China, and a new preparation for war rhetoric. In April and May of 2023, top officials in Australia’s defense and home ministries said that the drums of war were beating, and that conflict with China had a high likelihood.
The military-industrial-congressional complex has done its work well.
Peace Threats Profits
Unlike the U.S., China does not have hundreds of overseas military bases around the world. They have not installed anti-missile interceptors near the United States or for that matter anywhere in the world. Their navy is not carrying out military exercises near our Pacific or Atlantic coasts. Their policies toward Taiwan — 80 miles from their coast — though aggressive, are far less aggressive than U.S. sanctions, boycotts and blockades directed against Cuba. The U.S. even maintains the Guantánamo Bay naval base directly on the island itself. China’s efforts to claim and control sea lanes adjacent to their shores are certainly a source of concern but far from a sound basis for launching a new Cold War.
Military profits are soaring due to both the U.S.-Russia proxy war over Ukraine, and the preparations for war with China. The problem is, when you stoke fear and convince folks that preparing for war is necessary and urgent (profiting all the while), it is difficult to find a reason not to go to war.
However, the Biden administration seems to have paused the continuous beating of the war drums with an initially secret trip by CIA Director Burns to China in May, Secretary of State Blinken’s visit in June and a July trip by Treasury Secretary Janet Yellen. The officials discussed establishing “a floor” enabling cooperation on global economic stability and global warming. Yellen says the U.S. does not intend to decouple its economy from China, in spite of efforts directed at allies aimed at the contrary. The wing of the military-industrial-congressional complex allied with the Biden administration has agreed to at least a temporary cooling of rhetoric. Hopefully this pause extends leads to deeper negotiations with Chinese officials.
There is little doubt that the intensified cold war with China and with Russia will increase the profit margins for defense contractors. But the draining of our national wealth into nonproductive military expenditures, and the increased danger of a nuclear exchange is not in the interest of the U.S. people; it is among the gravest of threats to them. Let’s hope that rational voices promoting productive engagement and international cooperation prevail.