Mystics & Statistics

The people who are saying with certainty that China is going to invade Taiwan in the next two decades seem to be discounting a lot of factors that would indicate that China would not do so, regardless. For example, I would guess that there is at least a 50% chance that the Chinese economy would stagnate or slow down in the next two decades. This most likely precludes them taking a step as drastic as invading Taiwan. Then there is the current leadership of China, which tends to be careful and cautious. I do not think the current leadership of China is likely to invade Taiwan. They may well be in power for the better part of the next two decades. So, one could make the argument that there appears to be a least a 75% chance that China will not invade Taiwan in the next two decades, regardless of the degree of U.S. commitment.

Now, I have heard some people talk about this invasion as almost a certainty. To bring me on board with their thinking they would have convince me that: 1) Xi Jinping and the current politburo are ready to take such a gamble, 2) that the Chinese economy will be continually stable and  growing for the next two decades, and 3) that they have built up their air and naval capability to ensure such an effort. I don’t think one can make a rational argument that it is almost a certainty. Still, it is a possibility and a very real possibility, which leads us into examining U.S. commitment.

The degree of U.S. commitment is a significant variable, and perhaps the most difficult element to predict. There does some to be some sort of “conventional” wisdom that the United States is hesitant to commit troops to fight in far off places. Yet, the actual track record is the reverse. So, for example, it appears that some people (including Joseph Stalin) assumed that the United States would not intervene if there was an invasion of South Korea. So North Korea rolled across the border in 1950 with their T-34s, the U.S. responded, and my father ended up fighting there.

Then there is Vietnam, where we had a large military assistance program of tens of thousands of people and the South Vietnamese government was still losing the war. So we then decided to send hundreds of thousands of troops there to engage hundreds of thousand of Vietnamese guerillas and even some North Vietnamese troops, putting us into the fourth bloodiest war in U.S. history. My father ending up fighting there twice.

Then there is Kuwait, where the United States had no political, legal, alliance, or defense obligations; yet when they were invaded in 1990 by Iraq, we sent over hundreds to thousands of troops and drove the Iraqi’s out in the 1991 Gulf War. None of my family were involved in that one, although Trevor Dupuy did some estimates for congress that are worth noting (see: Forecasting the 1990-1991 Gulf War | Mystics & Statistics (dupuyinstitute.org) and Assessing the TNDA 1990-91 Gulf War Forecast | Mystics & Statistics (dupuyinstitute.org) and Assessing the 1990-1991 Gulf War Forecasts | Mystics & Statistics (dupuyinstitute.org)

Then we were attacked on 9/11. In response in 2001 we invaded not only the country that was housing Osama bin Laden (Afghanistan), but in 2003 we also invaded Iraq. Threw both governments out of power and occupied both countries. My brother was in Afghanistan a half-dozen times. None of my family were involved in Iraq, although I did do an estimate of casualties and duration for a guerilla war in Iraq: See America’s Modern Wars, Chapter 1.

And then there is also the Cuban Missile Crisis (1962), the Invasion of Grenada (1983) and the Invasion of Panama (1989), among many other interventions. My father was deployed in the first one as part of a projected amphibious invasion force. We have no direct connection to the other two events.

So, if you have smugly adopted the “conventional” wisdom that the U.S. won’t commit troops to fight in far off places, well you probably should re-evaluate the basis for your smugness. It does not match with my personal experiences.

The real discussion:

So, will the United States intervene to support Taiwan? Well, that does not have to be answered with a definitive “yes.” A simple “maybe” is probably enough. It is a case of deterring the Chinese from determining that this could be a successful course of action. If it is uncertain, will they then undertake it? 

The main thing is that it needs to be clear that the answer is not “no – we won’t intervene.’ We also have to ensure that the Chinese do not make the mistake of assuming that it is “no” or calculating that if they move quick enough, it can be presented as a fait acompli (much like Stalin tried with North Korea in 1950). So, the most likely U.S. strategy is that they will continue to make it clear that they are willing to support, able to support Taiwan. The problem is that not only do they need to make it clear, but they need to make sure that China believes it.

Now, the actual level of support for Taiwan in the U.S. may decline over the next twenty years. There are three major factors driving this 1) the U.S. does not have strong ties to supporting Taiwan, 2) the current Republican Party appears to be leaning towards being anti-interventionist, 3) the Democrats have traditionally not been interventionist (although WWI, WWII, Korea, Cuban Missile Crisis and Vietnam occurred on their watch). Lets address each of these:

1. Are the U.S. as willing to defend Taiwan because it was a democracy as they were when they were “anti-communist?” The PRC is still one of four communist countries in the world, but the policy of containment and anti-communism is not what it once was. Do we care as much about supporting democracies as we did about containing communism? Probably not. There is not a track record to strongly indicate otherwise.
2. Elements of the current Republican Party appears to be anti-interventionist. This is not the first time. They were very much that way in the 1920s and 1930s and there have been significant isolationist and anti-interventionist movements in the party in recent times, including Pat Buchanan’s runs for president in 1992, 1996 and 2000 and Ron Paul’s campaigns for president in 2008 and 2012. The last Republican president appeared to be instinctually an isolationist and anti-interventionist. Is this the future of the Republican Party going forward? Hard to say. I saw Liz Cheney tweeting this week about defending Taiwan, but she is kind of on the outs with a lot in people in the party (they voted her out of her leadership position in the House). So, it may well be. As it is, I suspect they will be out of power more often than they are in power for the next 40+ years (See: Is the United States on the Verge of Becoming a Single Party Democracy? | Mystics & Statistics (dupuyinstitute.org))
3. Then there is the Democratic Party, which has been anti-interventionist since the Vietnam War (they were not before the Vietnam War). Still, since the Vietnam War we have seen intervention by Democratic presidents in places like Kosovo, Syria, Libya, etc. So, they are not completely anti-interventionist, but this is a strong tendency in the party.

So, we are staring at a situation where the vast majority of the electorate, many congressmen and many senators don’t really have a strong opinion on this. This creates an environment where there is not a lot of clear underlying support for Taiwan.  

The key then becomes who is president. That seems to be driven by whoever is randomly in office (and sometimes it does seem random). Would we have sent over a couple of hundred thousand troops to liberate Kuwait in 1991 if Michael Dukakis was president instead of George Bush Sr.? Would the United States have invaded Iraq in 2003 if Al Gore was president instead of George Bush, Jr.? It is clear that who is in charge makes a big difference in these types of decisions. So, the question is: who will be in charge of the United States from 2029-2036 (assuming the current president serves for two terms, which is the most likely scenario) or 2037-2044? That is a pretty tough guess at the moment, although I do believe it will most likely be a Democrat. Will that individual be willing to intervene to protect Taiwan? Keep in mind, they actually don’t have to intervene, just have to appear to be willing to.

While I don’t think the U.S. policy on Taiwan will officially change over the next twenty years, the issue will be whether the United States has a credible deterrence. The key adjective is credible. As long as the Chinese believe there is a good chance that the United States will intervene, then there is deterrent value to the policy. If they do not believe we will, then that deterrence is gone. 

Now, the one thing we could do to maintain a credible deterrence is to base troops there (like we do in South Korea). I don’t think that anyone senior in the last or the current administration is recommending that. I also don’t think that this is likely to be U.S. policy going forward. Still, it is an option worth considering, for even if the vast majority of Americans are not interesting in supporting Taiwan, having troops there serves as a trip wire. It almost guarantees U.S. involvement and therefore serves as a very credible deterrent. Still, I suspect this would be a very hard sell for the American people. Also, if the U.S. did deploy troops to Taiwan, there would certainly be an outcry and some kind of response from China. That may not be worth the pain.

Now, in the past, deterrence has worked. Obviously, it has not always worked (Korea 1950), but in the case of the cold war, western Europe was not invaded by the Soviet Union and the Soviet Union and the United States did not fire nukes at each other. So, in those cases deterrence did work for 40+ years. The question is: can the U.S. maintain a credible deterrence against China in the decade after next. I do have my doubts. Of course, this does not automatically mean that Taiwan gets invaded, but it does open the door to that possibility.

Now, the Chinese economy has been on a tear for the last three decades. This graph cribbed from Wikipedia nicely shows this trend:

It was doing double-digit growth rates and is still growing 6-7% a year. As I point out in my previous blog posts, the Chinese armed forces are not really ready to invade a defended Taiwan, especially their air force and navy. This is going to take some time and money to build up. 

Such a build up sort of means that the economy needs to keep growing. Hard to justify lots of nice new shiny expensive high-tech airplanes when the economy is in the doldrums. As the economy has been steadily growing at 6% or more a year for 30+ years, their definition of doldrums may be pretty slanted. 

Now, relatively speaking, the Chinese have not been putting as much into defense as either Taiwan or the United States. Their defense budget is between 1.3% to 1.7% of their GDP. In contrast, the U.S. defense budget is between 3.4% to 3.7% of its GDP. Taiwan’s defense budget is around 2.3% of their GDP. As the Chinese economy grows, so to will their defense budget; I suspect we will know they are serious about changing the status of Taiwan if and when their defense budget expands to 2 or 3% of GDP.

But, the big question is whether the Chinese economy is actually going to keep expanding at 6% a year. A lot of people have been questioning that for a while, some people have been predicting that China is heading for an economic crash, some people have been claiming that the economy is artificially boosted, and other people are claiming that their economic statistics are artificially boosted. Regardless, they are facing a changing economic environment with India and other countries taking over the “cheap manufacturer” role. The transition to a more developed and growing economy could be a little fraught. 

There is one big ticking time-bomb the Chinese are facing, which is their demographics. I have blogged about this before (see below). The birth rate of China is below replacement rate, so the population is aging and the number of new young workers is declining. Old people are less productive and because of their health problems, sometimes more expensive. This is an economic drag with all aging populations unless one comes up with a Logan’s Run type solution. But, even a bigger problem will be the declining young work force. This is in part, a problem created by the one-child policy of China, which had good short-term benefits but has now created a long-term problem. Most likely the Chinese population will experience negative population growth by 2030. The population for China for 2021 is estimated at 1.44 billion. The United Nations predicts the Chinese population will be 1.36 billion by 2050. The real shortfall will be in the number of new workers.

Now, China is reacting to that with a new three-child policy. An article on that is below. China abandoned is one-child policy in 2015 (much too late in my opinion), went to a two-child policy and now have upgraded to a three-child policy. What is next: do they all become Mormons? This does look like an exercise in desperation. But, regardless of what the Chinese government does, I don’t think we are going to see a sudden sea-change in Chinese demographics over the next twenty years.

So, if the population starts declining by 2030…then does the economy decline with it? I think it will slow economic growth down. Hard to imagine they can maintain their 6% growth rates in that environment. They appear to have no quick and easy fix.

Now, a slow growth, stagnant or declining economy creates all kind of new problems. First, it is hard to increase or justify defense expenses when the economy is stagnant. If they are serious about creating the modern air forces and navy that they need to invade Taiwan, then they need to go on a spending spree for a decade or so. Chinese is looking at the population starting to decline by 2030. In 2020 they only had 12 million new births. By 2025 they will have over 300 million people over the age of 60. Does this mean that they have already “lost the bubble” for the chance to build up their military so as to take Taiwan?

Second, invading Taiwan is going to have a big negative economic impact. I have discussed this before, with perhaps a loss of 60-80% of their trade, 60% of their oil and a decline in their economy of 30-40% (just a guess). See the post below.

Third, stagnant or declining economies tend to lead to demands for political reform. This leads to either governmental reforms, leadership changes, civil unrest or even overthrow of the government. It was the extended period of economic stagnation that set the stage for the overthrow of Communism in Russia. We did go from a world in 1991 that had 16 Communist governments to a world with only four (China, Cuba, Vietnam and North Korea). Is this the final stage of that movement? One cannot rule it out. Hard to imagine the leadership of China is going to be focused on invading Taiwan if they are facing another Tiananmen Square (1989)

That said, there is a risk here in the danger to the government. Argentine invaded Falklands Island in part due to concerns about unrest in Argentina. In a sense, it was an invasion conducted for the sake of trying to bolster the government. This may not be a good example for China to follow, for not only did Argentina loose the war, but the government was overthrown and the leaders were arrested. The head of the Argentine junta was sentenced to a dozen years in jail. 

There is another example of a booming Asian economy that was going to surpass the United States. This is Japan. I have blogged about this before. To summarize: In 1995 the Japanese economy was 71% of the U.S. economy based upon GDP. In 2017 it was 25%.  I always liked this graph from that blog post:

Does history repeat itself?

Previous blog posts:

Invading Taiwan in the next six years – the fight? | Mystics & Statistics (dupuyinstitute.org)

Proposed Defense Budget for 2022 | Mystics & Statistics (dupuyinstitute.org)

Demographics of China | Mystics & Statistics (dupuyinstitute.org)

“We can’t afford it”: Chinese internet users have rejected Beijing’s new three-child policy

Where Did Japan Go? | Mystics & Statistics (dupuyinstitute.org)

P.S. Chinese economy grew 6.7% in 2018, 6.0% in 2019, 2.3% in 2020 and is projected to grow 8.5% in 2021 (source: World Bank and for 2021 IMF). In contrast, the U.S. economy grew 3.0% in 2018, 2.2% in 2019, -3.5% in 2020 (it shrunk), and is projected to grow 6.39% in 2021 (source IMF).

P.P.S.: A recent article on Chinese demographics that repeats what I have been saying: https://www.reuters.com/world/china/china-2020-census-shows-slowest-population-growth-since-1-child-policy-2021-05-11/