The Thucydides Trap

China, the US, and the Thucydides Trap

Book Chapter, Investment Strategy, Public Policy, , , , , , , ,

The “Thucydides trap” is where a rising nation-state – for Thucydides it was Athens – must eventually have a violent confrontation with the existing dominant nation-state – Sparta in his time. It is a zero-sum game where there can be only one dominant nation-state as the eventual winner – and it is usually assumed to be the rising nation-state outdoing the dominant nation-state.

Today, many “experts” (and I have great disdain for self-proclaimed experts) believe this is the circumstance between the US and China. We are headed toward violent confrontation where there can be only one winner. I read the book by Thucydides about the conflict between Athens and Sparta (I cannot be dispassionate here about that outcome because my family is from Sparta on my father’s side). But I fundamentally disagree with Thucydides’s historical descriptions being used as analysis by anyone to describe global events, especially those between the US and China.

Investment Principles

Stimulus and silliness

Book Chapter, Public Policy, , , , , , , , , ,

The world economy is struggling to escape the Covid-19 economic shock. During the worst of this pandemic, the world’s developed economies provided an enormous fiscal stimulus on a scale not seen since the second world war.

Now, however, the US is proposing to more than double its already generous fiscal stimulus. Is this a good idea or excessively risky?

Go Big, But Where?

For its proponents, the idea of “going big” is designed to be a transformative political moment. But too much appears allocated inefficiently, and it may simply be irresponsible.

An easy money era produced only anemic growth. But the scale and direction of additional stimulus look more like irresponsible fiscal policy leading to significant overheating and the waste of resources. While there is a strong case for a more aggressive approach to fiscal policy, that policy still needs to be grounded in economic realities and reasonable priorities. These are not.