Latest / UK Column Radio / Decoding the Xi-Trump Call: A New Chapter for US-China?

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Decoding the Xi-Trump Call: A New Chapter for US-China? · UK Column Radio

0:01
Hello and welcome to another episode of the Silk and Steel
0:04
podcast. I'm your host, Carl Zaa.
0:06
Today I have back on the show Mr. Warwick Powell extinguished
0:13
Professor from Australia. Professor Warwick, you are very
0:17
much requested on my show. Many people love the appearance.
0:21
There's a couple things I want to talk to you about today at
0:24
first. First, let's talk about the
0:26
recent news that the Trump she call.
0:30
What do you think that is about and what do you think he
0:32
actually portains any change in the US China relationship?
0:39
I think that there's a few things.
0:41
Well, it's good to be with you so well, it's nice that that
0:44
your community, our viewers, you know, thought that I was worth
0:49
listening to. So that's, it's very flattering.
0:53
And in fact, you know, if, if people don't think flattery
0:57
works, it's because they've never been flattered in their
0:59
lives. So, so, so thank you again.
1:06
What can we say? The the first thing I think of
1:11
interest, and perhaps it's a bit of passing interest before
1:14
getting into the substance of it, is that there was a lot of
1:16
excitement yesterday on the news of the, the phone call.
1:22
Not so much it's because there was a phone call, but because
1:25
the media in the mainstream at least broke that.
1:29
The call was initiated by the China side and and a whole bunch
1:32
of people jumped on that and got very excited by all of this, you
1:36
know, waxing on about them, how it's the first time since 1991,
1:40
etcetera, etcetera, etcetera. Well, 24 hours later and having
1:44
allowed the dust to settle, both sides actually acknowledged that
1:48
the call was initiated by Washington, not by Beijing.
1:51
So in some respects, all of that excitement was for naughty.
1:56
I guess the lesson out of all of that is before folk jump to any
2:00
of these sorts of grand conclusions that perhaps they
2:04
should just take half a step back, take a take a few deep
2:07
breaths, go for a walk, and then have a look at what actually
2:09
happened in the, in the coolness of of of day.
2:13
Let let time pass a little bit. The IT probably also says
2:18
something about how the mainstream Western media is
2:20
chronic, is perpetually looking for some angle on something
2:23
right? And to a point where they're
2:26
making so much stuff up these days, it's hard to keep up with
2:29
what's going on. The substance of the call I
2:32
think clearly dealt with probably 2 main things.
2:36
One was in some respects a follow up operational call post
2:40
Busan and the agreements reached in relation to the, the, the,
2:46
the trade related issues. And, and clearly those issues
2:51
were primary of concern in so far as President Trump's own
2:56
social media readout was concerned on the China side.
3:02
It touched on those issues. But it also was quite specific
3:06
that the question of Taiwan was raised.
3:07
And it was raised in the context of an an historical dynamic.
3:15
And that is that the United States and China were actually
3:18
allies in the war against Japanese fascism and aggression.
3:22
And that the resolution of the Taiwan question, particularly in
3:25
the context of the Japanese Prime Minister's recent comments
3:29
about Taiwan, that the resolution of the Taiwan
3:32
question is actually a finalization of the post Second
3:37
World War settlement. And therefore, President Xi was
3:40
drawing a very strong thread of continuity between the AL
3:45
alliance in the Second World War against Japanese aggression and
3:49
the finalization of China's reunification.
3:53
Now, I don't think that that necessary changes anything in a
3:56
daily sense, but quite clearly the the the the Chinese framing
4:03
of the Taiwan question vis A vis the United States and Japan
4:08
within that broader historical arc, I think is is worth noting.
4:13
I don't seem to recall that particular framing ever been
4:17
emphasized, certainly not for a long, long time.
4:20
If in fact it had been funnily enough, and perhaps not so
4:24
funny, perhaps predictably enough, a whole bunch of folk,
4:30
you know, who are hostile to the idea of Chinese urine
4:33
unification and who are mainly Westerners in favour of, of
4:38
Taiwanese independence leapt on this and saying, you know, this
4:42
is outrageous. You know, the, the allies during
4:45
the Second World War was, was actually the, the Roc and, and,
4:50
and the KMT and the United States, not, not the Communists,
4:55
you know, I mean, that's a, that's, that's a pretty cheap
4:58
trick to play really. Because at the end of the day,
5:02
the war was actually between countries.
5:04
And, and if you wanted to follow the logic of those folk, you'd
5:09
actually say that the Americans were never involved in the war
5:12
either. But it was actually a war
5:13
engaged in by the Democratic Party.
5:16
So, so China was an ally of the United States during the Second
5:24
World War. And, and, and that's the end of
5:28
the story, right? It continues all the way through
5:30
because guess what? Regardless of which side of the
5:33
civil war you landed on, you both think that you're fighting
5:37
over the one China and, and you both still think that there is
5:40
only one China. And you both actually still have
5:43
the view officially that the civil war hasn't concluded.
5:46
So, you know, I think we are moving inexorably towards a
5:52
resolution of the, of this question, this historical
5:55
question and, and perhaps the call between XI and Trump and
6:00
the way that it was framed from the Chinese side was in many
6:03
regards laying the groundwork for this next chapter that to
6:06
bring, to bring to bring to an end this, this loose thread.
6:12
Yeah. And I think, I think you're
6:15
right. This is the first time China
6:17
bring up the historical settlement of World War 2 and US
6:22
and China should be upholder of the post war global framework.
6:28
But we more recent years China had used similar language with
6:33
Russia, for example, that that is more in reference to, you
6:38
know, kind of the historical revisionism that's going on in
6:41
Europe about Soviet Union's role in defeating Nazism.
6:47
And, and, and, and this is first I seen this has been kind of
6:51
applied to East Asia and also what China want to emphasize.
6:55
What's that? Taiwan was returned to China at
7:00
the end of War 2. You know, people should not
7:02
forget that. And you know, a lot of people
7:05
try to ask you skate around the issue like you mentioned.
7:08
They, they, they say, oh, Roc was, was a victor of the war,
7:12
not the Communist. So, so this has nothing to do
7:15
with the communist. But as far as the government in
7:18
Beijing concerned, you know, it's all China.
7:21
China was Taiwan was returned to China.
7:25
That is the end of the story. Now what what we have right now
7:29
is a is a a, a, a issue that's from from from from history
7:34
that's to be resolved between Chinese people on both side of
7:39
the Taiwan Strait. This has nobody else should be
7:43
butting in and and interfering a Chinese internal matter.
7:46
And and this in particular is a reference to recent statement
7:50
made by the Japanese Prime Minister Takaichi and and it
7:55
looks like he immediately follow the Xi Jinping Trump call.
7:59
Trump actually made a call to Takaichi and, and according to
8:05
the Japanese read out only thing they said was that the talk was
8:08
friendly, but they release no details other than that.
8:14
So I, I, I, it almost seems like Trump made a call to Japan and
8:19
telling them, OK, you got to calm down.
8:22
We don't need to stir up another big flash spot in East Asia at
8:27
this particular point, which seems to give credence to the
8:34
the view that right now US is doing a tactical pivot, you
8:40
know, not a strategic pivot, but a tactical pivot from East Asia
8:46
to to elsewhere, maybe to Venezuela or to Nigeria and
8:50
Africa. Do you think this pertains to a
8:56
a, a, a a possible day, Tom, between US and China at this
8:59
point, at this juncture? And I suspect not the what what
9:06
what I think we're saying is a recalibration of means and
9:10
method rather than strategic objectives.
9:14
So the United States has for a long time had a strategic view,
9:19
its national security doctrine, which in essence says that the
9:23
security of the United States is contingent upon American
9:26
dominance of the world. And that includes, of course,
9:30
its position in in East Asia just as much as it included its
9:35
position in Eastern Europe. So if you looked at the map, you
9:39
do see the United States bookending the Eurasian
9:41
continent and ensuring that the peripheries on those on those
9:45
bookends were fragmented and divided in ways that would
9:49
destabilize the the other great powers in this landmass.
9:54
So I don't think the United States has actually shifted its
9:57
strategic objectives, which is global hegemony and in in the
10:01
name of American National security.
10:04
What it has had to do is confront reality.
10:06
And it's reality is defined by the fact that it is not now in a
10:11
world where it no longer is the unquestioned unipolar hegemon.
10:16
That's the first thing we have seen on the European end, the re
10:22
emergence of Russia as a great power.
10:24
I mean, Russia's always been a nuclear power.
10:26
Let's never forget that. But in so far being a an
10:30
economic power, a cultural power, a diplomatic power and
10:34
arguably A civilizational power, this has been a relatively
10:37
recent turn of events. It's certainly far north and a
10:39
gas station masquerading as a country.
10:42
The second thing is, is that China's emergence over the
10:45
course of the last 80 years to a point today where it is in many
10:50
respects a peer of the United States and in other respects is
10:54
more than a peer of the United States, I think has reshaped the
10:58
the question of the balance of power.
11:01
So the United States is seeking to modulate how it pursues its
11:06
strategic objectives. And it's doing that in large
11:10
part by cultivating proxies to carry on the burden, to take the
11:14
brunt of any of the of the pressures that come from being
11:20
at the front line and to carry some of the financial costs as
11:24
well. And we've seen how that's played
11:27
out tragically in Ukraine. And clearly, in terms of how
11:31
it's mobilizing Japan, the Philippines and Australia, it's
11:35
seeking to do similar things. So I don't think the United
11:38
States has fundamentally at this point in time, come to a view
11:42
that it's in the business of reframing coexistence with
11:45
China. It does still seek, particularly
11:49
if you spend time reading through the think tank reports
11:52
as well as the testimony given to congressional committees, the
11:58
the American body politic remains hot and bothered about
12:02
China's development and its growth, and it will seek to do
12:06
whatever it can to contain it at best, or, if it can possibly do
12:10
so, retarded. That's where I think things are
12:13
at. Now I now that I want to ask you
12:17
that, well, it's obviously America's interest to shift the
12:21
burden to its vassal states like Japan and Europe.
12:27
What, what is it in it for the vassals?
12:31
What's in it for Japan, for example, to stir up the latest
12:35
tension with China over prime Japanese prime minister's remark
12:40
over how Japan might deploy military to a situation in
12:47
Taiwan? Like, why?
12:49
What does Japan gain? Or, or I should say, what does
12:53
these Japanese politicians gain from picking up fight with China
12:58
at this particular juncture? Yeah, look, I think that there's
13:01
a few layers to all of this, of course.
13:02
So at an individual level, the new Japanese Prime Minister, who
13:06
came to office through an internal party ballot, needs to
13:10
consolidate her position. She comes from the right wing
13:14
end of the political spectrum. She has a history of being an
13:18
advocate for historical revisionism both around the
13:22
Second World War, broadly speaking, but also in terms of
13:24
Japanese atrocities in China. So she comes from that part of
13:29
the political spectrum and in the processes of assuming the
13:32
prime ministership needs to consolidate that.
13:35
In part. I think that this is part of the
13:38
calculus, right? The second thing, of course, is
13:40
that there's always muscle memory, institutional and
13:43
political muscle memory. And we see this in in many
13:49
vassal or or quasi vassal countries where political elite
13:53
ultimately internalize a particular way of thinking about
13:58
their interests, meaning their country's national interests in
14:01
ways that subordinate that to the interests of the United
14:04
States. So the basic sub imperial
14:07
reaction is that what's good for the United States by definition
14:10
is good for us. So I think in part this is a a
14:16
muscle, a memory or a reflex manoeuvre.
14:19
The third thing though is that I think the Japanese strategic and
14:27
security and even economic institutions are concerned that
14:30
in fact Japan is quite vulnerable both economically and
14:35
in a security sense within the region.
14:38
And this is this, this recent intervention is, is an attempt
14:43
to gain attention, you know, don't forget us, and to Curry
14:48
favour, which is to reinforce the idea of don't forget us.
14:53
Let's not forget the United States still has something like
14:55
55,000 troops in Japan under extraterritorial provisions.
15:00
And, and so in some respects, the Japanese remain very
15:04
dependent upon the United States for for the provision of
15:08
security. In broader regional terms, the
15:11
Japanese economy is facing some, you know, significant headwinds.
15:16
It's not in a particularly healthy state and and it really
15:20
needs to find a way of improving its economic performance.
15:24
And from a prime minister's point of view, part of the
15:27
political problem is if the economy doesn't improve, you
15:29
tend not to last too long anyway.
15:31
The second issue I think, which I think is kind of counter
15:34
intuitive in so far as these recent interventions go, is that
15:38
Japan also faces big issues with regional security, particularly
15:44
the the Korean Peninsula and the DPRK.
15:48
You know, ruffling China's feathers and undermining the
15:54
collaboration that you might have with China as a good office
15:59
does not actually help the Japanese stabilize its
16:02
relationships in the area or stabilize the region more
16:04
generally. And I think that there's a
16:06
longer term set of problems too, which I'm not sure the Japanese
16:10
political elite have really thought hard about.
16:13
Perhaps they're a bit too long term.
16:14
And that goes to food and energy security.
16:18
Japan is a major importer of energy.
16:20
Over 90% of its energy needs are imported.
16:24
It imports the majority of its food as well.
16:26
And it needs to find a way of stabilizing these critical
16:31
inputs. Otherwise it's social stability
16:35
will progressively diminish to a point where its economy and
16:39
society will cease to function properly.
16:41
And all of that, I think places incredible pressure on Japanese
16:46
policy makers because in many regards, the things that have
16:49
given Japan comfort for, you know, 60-70 years are things
16:54
that are stopping its ability to resolve its future problems,
16:57
right? So it's right in the middle of a
16:59
contradiction at the moment. I, I mean, I, I, I, I'm in
17:03
complete agreement about the, the, the, the pending implosion
17:08
of the Japanese economy, but wouldn't stirring up trouble
17:13
with China worsen that situation?
17:15
You know, like for example, the the Japanese tourist tourism
17:20
industry is immediately hit in the aftermath of this, this,
17:24
this, this, this rising of tensions and, and tourism of
17:29
composable 7% of the Japanese GDP.
17:32
And how is that going to help to have this rising tension with
17:39
China when a lot of Japanese firm, you know, still depending
17:45
on the Chinese market for example?
17:47
Well, it's not right. So this is the classic
17:50
contradiction that Japan finds itself in now and it's being
17:55
squeezed economically by Washington through the
17:59
imposition of tariffs, demands on Japanese investing surplus
18:03
dollars into the American economy under the the guidance
18:07
of President Trump. So the Japanese policy makers,
18:13
if you will, and politicians of course, as a consequence, I
18:16
think are actually in a very, very difficult historical
18:19
position. And as I said, the legacy of
18:23
what gave Japan its comfort for the past seven decades or so
18:27
since the end of the Second World War are actually the
18:30
reasons that inhibits the ability of of Japan to navigate
18:34
a pathway through its challenges into the future.
18:37
Japan's long term economic interests are fundamentally tied
18:40
to the region. And, and what that really means
18:43
is that it needs to find a way of existing within a region
18:47
where it benefits from regional stability whilst contributing to
18:50
regional stability. At the moment it can't do any of
18:53
that. And and so it is trapped by
18:57
these muscle memory reactions coupled with I think that's very
19:02
immediate political dynamics, which goes to the revitalization
19:06
of nationalism, the sort of political inclinations of the
19:09
current Prime Minister given her political pedigree and those
19:13
sorts of things. But none of this helps Japan in
19:15
the long run. Let let me see if I understand
19:18
you correctly by so you're saying Japan's success is this
19:23
post war in large part depending on its partnership with United
19:29
States, you know, access to the US market in particular.
19:33
And but now with with the the the power balance is shifting to
19:39
the east with Asia Pacific becoming the most important
19:44
dynamic region economically. Japan is having difficulty
19:49
making that transition from depending on United States to to
19:55
reorient itself to Asia. Is that is that what you're
19:59
trying? To say that's right and, and
20:01
look, the, the, the, the big issue is it needs to reorient
20:04
itself to Asia is around energy and food mixing with, of course,
20:07
regional stability and security. When it, when it imports 90 plus
20:11
percent of its energy resources, it needs to find access to cheap
20:16
energy, right? Cheap and stable energy.
20:18
Surprise, surprise, it actually has dispensation from its
20:21
Western allies to to continue with getting its gas from the
20:26
Sakalin project with the Russians.
20:28
But that's but that's just a symptom of its problems, right?
20:33
You know, with the United States at the moment pushing its
20:37
European allies to essentially become a an American gas client.
20:43
It, it, the last thing Japan needs is to be trapped into that
20:46
environment as well, because that's just going to be
20:47
expensive energy And, and it needs to find a way to having
20:52
more independent, cheaper, more reliable energy.
20:55
And there's only one. Well, there's a couple of
20:57
pathways, right. One of them is of course through
21:01
upgrading nuclear capabilities. In the event that it could do
21:04
that, it would also need to look at the, the role of renewable
21:09
energy Allah, China. And of course it needs to
21:13
access, you know, gas and, and it's best source of gas is
21:19
actually from, from the Far East of, of Russia.
21:24
You know, that that's actually where Japan's future should be.
21:27
If Japan had a blank slate to work from, I would think it
21:30
would be working at ways of deepening its connectivity into
21:35
northern China, into Siberia, because those parts of the world
21:40
are actually rich in food and and food capabilities,
21:45
agricultural capabilities and of course, energy.
21:47
With with the warming of the Arctic, you'll also find that
21:52
that that part of the world will become even more accessible as
21:55
time goes by, particularly for agriculture and also for energy
21:58
as well. But Japan's trapped.
22:01
It's trapped by post war arrangements.
22:03
It's trapped by the fact that it can't see its way out of its
22:08
military alliances with the United States and consequently
22:10
is being pulled. Hit her and thither.
22:15
That is a very, very incisive insight.
22:20
So now I want to pivot to your recent articles that you have
22:24
written for your sub stack. I know you are very prolific
22:28
writer. You know, you have, I saw you
22:30
have many new articles now posted on your sub stack.
22:35
Maybe, maybe you can give us my audience just a general rundown
22:40
of your thoughts. Yeah.
22:42
Yeah, look, well, I'll start actually with with, with the
22:46
fact that I learned to touch type when I was 16.
22:49
And and that's been incredibly helpful.
22:51
At the time when my father made me go and learn to touch type on
22:54
a computer, I thought that it was a stupid thing to do.
22:58
But, but I guess that's just another example of where those
23:01
older than you are often wiser than you.
23:04
I also was fortunate enough to benefit from a working
23:08
environment where I was forced to initially, but ultimately
23:13
developed an ability to dictate, which allows you to be quite
23:16
productive. OK, so so in that sense, it
23:20
helps me take all the crazy ideas that are racing through my
23:24
head and turn them on to words on a screen reasonably quickly.
23:28
The body of work really focuses on a series of interrelated
23:32
themes, and the themes really are anchored by something that
23:38
I've come to call either a systemic exchange value
23:42
framework of thinking about economic systems or probably in,
23:48
you know, more interesting or more marketable terms, this idea
23:51
of thermoeconomics. And that's the idea that human
23:54
societies, economic systems are fundamentally material in
23:59
nature, and they involve energy transformations, right?
24:01
We are natural. This is how nature works, and
24:05
the substrate of our societies and our economic systems is
24:08
actually how we harness energy from nature, mobilize that
24:13
through work, and create new forms of energy that are
24:18
actually useful for human societies, both in short term
24:22
terms and also in terms of the institutions and the resources
24:27
that we make available for things that go beyond
24:30
reproduction. So there's a very materialist
24:32
view, if you will, around our economic systems.
24:37
Intersecting all of this is the idea that we have monetary
24:43
considerations. And I guess my starting point on
24:47
questions around money really derives from very early on
24:51
thinking from the the 1800s and even into the 1900s, which views
24:58
money in some respects as an endogenous feature of economic
25:03
systems and is in large part a claim on the future, right.
25:06
So I don't sort of view money as a thing that people have, let
25:10
alone a thing that's that we have scarcity about because we
25:13
have to find that in nature. But money is really a, a promise
25:18
that we make that enables us to exchange for things in the
25:23
future. So it's, it's a claim into the
25:25
future. And the third part of all of
25:27
this, which is the bit that actually always interested me
25:31
far more than the other elements, is the role of
25:33
information. So information systems actually
25:36
hold all of this together because without that, these
25:39
different circuits, if you will, of monetary autonomy, of
25:44
material and energetic transformations in the world
25:47
don't coordinate properly. And, and when they don't
25:50
coordinate properly, by the way, and we have major problems,
25:54
right? So we saw that in the global
25:56
financial crisis, when the monetary circuits essentially
26:00
spun off into orbit, they became totally detached from the
26:03
ability of the real world to to keep up.
26:07
And, and once there were more claims being made on the future
26:11
than the future could deliver, we started to get crises.
26:15
But we also have other kinds of crises too.
26:18
And the fundamental crisis that we constantly face is this
26:21
tension between this idea of entropy, right, which is the,
26:26
the, the complexity of systems and the breaking up of, of
26:29
systems with, and that's part of the natural world with human
26:35
efforts to counteract that right, which is to bring order,
26:39
bring shape, bring consistency and stability.
26:43
And this dialectic at work between the natural dynamics of
26:47
energetic systems, which is towards entropy, and human
26:51
efforts to control that, I think are fundamentally key drivers to
26:56
the challenges and opportunities that we have.
26:59
And one way of thinking about that, I'm rushing through a bit
27:01
of this, Carl, but I hope your viewers will bear with it, is
27:05
this idea that because we're interested in how energy
27:10
underpins everything, what makes modern societies work is our
27:15
ability to continually improve the energy return on energy
27:21
invested. So when humans go out there and,
27:27
and mobilize resources in the world and then convert those
27:31
resources into energy forms that we find useful, whether by
27:34
burning things or, or making things move and, and stuff, the
27:39
amount of energy that we have to use to get access to this next
27:44
batch of energy, that's the energy return on energy
27:47
invested. And the higher that is, the more
27:51
surplus energy there is beyond what we need to reproduce that
27:54
activity. So think of it like an A hunting
27:59
animal, right? That the tiger that has to hunt
28:04
for its food to be able to sustain itself.
28:07
So when a tiger happens to catch an animal and consumes it, the
28:13
energy that it gets from that animal through nutrition and all
28:17
of that must be enough for that tiger not only to be able to
28:21
catch the next animal, but it actually must be enough for that
28:25
tiger to chase and fail to catch six other animals and also lie
28:30
around and also breed and spend time protecting, you know, young
28:38
tigers from threats. So the surplus energy that comes
28:41
from what has been caught and consumed must actually enable
28:46
all these other things to happen.
28:49
One of the areas that I do a lot of work in as a result of all of
28:51
this is actually telling alternative stories about the
28:54
Chinese economy. So I, I tend to use the Chinese
28:57
economy, if you will, as my sounding board.
29:01
And that draws on my sort of long standing academic interests
29:05
and eventually professional interests in what's happening in
29:08
China, not to mention personal interests.
29:11
And so I try to bring all these. Threads together, right?
29:16
It's usually my way of thinking about the world, Kyle, trying to
29:19
figure it out for myself first and foremost, right?
29:21
And, and perhaps because I'm a glutton for punishment, perhaps
29:27
because if there's one thing I'm OK at, I'm able to at least
29:32
communicate some of these ideas. I find it's a it's a nice way
29:37
firstly to get all this stuff together, sort it all out in my
29:45
own mind and by sharing it maybe help other people think about
29:50
the world as well. Just to piggyback on some of
29:54
your ideas, I mean, I, I find this, this energy based thinking
30:01
quite fascinating because this kind of corresponds to, you
30:05
know, our more recent history with the industrial revolution
30:09
was essentially we human beings start to unlock the power of
30:14
fossil fuels and suddenly they get access to this new source of
30:18
a band founded energy. And then later they move from
30:22
coal to even more efficient fossil fuel like oil and gas.
30:27
And, and, and, and now, now it looks like we are in the next
30:32
phase. You know, China is leading the
30:35
way in many in many aspects, for example, in exploring the
30:39
renewable and China has made this the solar panels price fall
30:45
98% in the past two decades, for example.
30:49
But go go along those along those veins.
30:53
I'm thinking, I'm now I'm actually thinking about United
30:56
States because US actually do have abundant hydrocarbon
31:01
resources, particularly after the shell, the, the, the
31:06
fracking shell revolution and United States also have employed
31:12
a lot of capital in the information space.
31:14
So you know, US is actually in many aspects leading in for
31:19
example, in AI and, and, and information technology.
31:24
Then why is why the overall sense even inside the US is that
31:31
the US is in trouble somehow like like you should have
31:34
everything going for it, right? It has abundant energy.
31:37
You have all the the the information tech technology at
31:41
its proposal and it was you have the ability to brain drain on
31:44
the rest of the world to get the suck the human capital to US.
31:49
Why is it seems things are falling apart?
31:54
Well, I think we can look at the three threads, right, which is
31:58
this energetic transformation thread, the financial thread and
32:01
the information thread. So these are the three sort of
32:04
core elements that I guess constitute the the critical
32:09
parameters of my own theoretical thinking about social and
32:13
economic systems. And in fact, information itself
32:16
is an energetic thing, right? Which we don't normally think
32:20
about that way, you know, we often just trade information as
32:23
a, as a, as a free something or another, right?
32:27
But information itself is deeply energetic because it requires
32:30
certain amounts of energy to collect information, to store
32:33
information, to disseminate information, to process
32:36
information, etcetera, etcetera. And AI actually is a great way
32:41
of understanding how energetically embodied
32:43
information can be. But one of the challenges in
32:47
thinking about, I think, places like the United States, but not
32:50
only the US, but generally countries and civilizations
32:54
around the world, is to understand the ebbs and flows of
32:57
this issue of the energy return on energy invested.
32:59
So EROEII think is the key that helps us unlock some of these
33:04
mysteries. The United States did have
33:07
abundant and high EROEI energy resources.
33:12
It was, you know, the oil was more or less floating to the
33:16
surface right back in the day. So it was actually very easy to
33:21
extract and relatively straightforward to move from
33:24
point A to point B. As time went by, Of course, as
33:28
you take away the easy stuff, you end up having to commit more
33:31
and more energy to get the next, next hit, so to speak.
33:36
And eventually it reached a point where, with some of the
33:39
fracking now, it is increasingly difficult.
33:42
It requires more energetic effort to get the next Joule of
33:46
energy available for humans to put to work.
33:50
It certainly hasn't reached negative territory by any
33:52
stretch of the imagination, but it is.
33:55
But what it means as your EROEI gets smaller is that those
34:01
surpluses available for other social and economic things
34:04
diminishes. So think about that animal that
34:06
that tiger cord we're having to spend more money that tigers
34:10
having to spend more energy running after a faster but
34:15
scrawnier animal. So when it does catch something,
34:18
it's actually getting less energy, having spent more energy
34:21
getting it. That's the dilemma that I think
34:24
the US is in now. It can change that equation
34:29
through a number of things. One is through technological
34:31
advancements, which of course have uncertainty attached to
34:36
them. It may or may not work.
34:38
We may discover new ways of tapping hydrocarbons that
34:43
weren't available before, and that makes it more energy
34:46
efficient. Another way, of course, is to
34:48
shift the things like nuclear. And the third way is, of course,
34:53
moving into these this sort of renewable space.
34:56
The challenge in the US is that energy has been heavily
35:00
politicized through vested interests and ideology, whereas
35:06
China literally doesn't have that level of politicization
35:10
over energy. Yeah, sure.
35:13
You know, there are parts of a country that are more abundant
35:16
in coal, for example. And coal will, whilst it's been
35:20
growing, plays a proportionately lesser role in the in the
35:23
growth, but but it doesn't have the same sort of political pool
35:28
as oil interests do in the United States, for example.
35:31
So I think that's your first problem that the United States
35:34
confronts. The second one is this AI issue
35:36
and how that intersects with energy.
35:38
And because energy's actually increasingly more expensive to
35:46
make available and the delivery infrastructure is not up to
35:51
scratch to be able to get electricity to where it needs to
35:54
go. Given the proliferation of new
35:57
uses, namely AI data centers, you run into a few challenges. 1
36:02
is that AI data centers start to compete with other demands for
36:09
electricity. And the one thing that that
36:12
always does is that it drives up prices.
36:14
And we're seeing that The second thing that that's doing is that
36:18
it also means that that the energetic cost of information
36:22
processing rises as well. So suddenly something that in
36:25
theory should have been incredibly low cost energy wise,
36:29
not just financially, but energy wise actually becomes higher
36:32
cost than we ever thought. And if we actually understand
36:36
information as embodied energy as well, then we do actually
36:40
have to confront the fact that not all information is good
36:44
information. If that information costs more
36:47
energy to make available than the energetic benefits of that
36:51
information. In other words, does that
36:53
information help us deal with entropy?
36:55
Does it help us coordinate things better?
36:57
Does it help us create new technologies, etcetera,
37:00
etcetera. And if you end up with and AI
37:04
infrastructure that focuses on adults only, only fan style
37:11
staff or you know what, what whatever else Sam Altman's
37:17
talked about, then that arguably is actually not energy
37:21
productive fraud as a way of that that kind of information is
37:25
actually not, not not an energy productive information use of
37:28
information. So I think that they're the
37:31
challenges the US faces. Whereas when you go to a place
37:33
like China, there's a lot less of that stuff.
37:36
There's also much less effort put into pursuing, you know,
37:41
human or or Western humanities aspirations to replace God.
37:45
So there's very little sense that AI is about artificial
37:50
general intelligence. You know, when I talk to
37:54
colleagues in China, in the AI space in particular, no one ever
37:59
talks to me about artificial intelligence.
38:02
It just doesn't seem to be the driver.
38:04
What seems to be the driver, of course, is things like how do we
38:08
embed this so that calculations can be done quicker, smarter,
38:12
more accurately, so that something else can happen
38:14
quickly. So it's all about creating
38:17
abundance again, constantly about speed, abundance, making
38:21
surplus energy available for other things.
38:24
I saw on on X recently an American Chinese scholar visited
38:29
China and came back saying oh you know, didn't see AI anywhere
38:34
explicitly being used by Chinese consumers.
38:36
Well that's the point. Most of the AI is actually
38:39
embedded in the back engine. There's no button that says AI.
38:45
It literally is happening in the back engine, enabling things
38:48
like drones to deliver things quicker, cheaper, transport
38:52
systems to work quicker, cheaper, more efficiently, ports
38:55
to unload container ships in 40 minutes instead of eight hours.
39:00
That's where this is all happening now.
39:05
So I think the US actually, in terms of the USI think the part
39:08
of the the challenge is the accumulated surplus energies
39:11
over historical time is a lot. We've also got a financial
39:16
circuit that has literally spun out of control, which means that
39:20
there is actually a lot of financial capability, meaning
39:23
that the claims that could be made on the future are huge.
39:27
The problem for America at the moment is that the future really
39:31
isn't in a position to deliver on all those claims.
39:35
But but you know, you talk about the role of money and US is
39:39
actually in control of the money supply, right?
39:42
I mean like. Kinda part of the difficulty
39:47
with this idea of controlling money supply is that the vast
39:50
majority of money capital floating through the the
39:54
economic system in America actually comes from bank credit.
39:58
No one directly controls that. That comes from borrowers
40:01
seeking credit and commercial banks are taking the view that
40:05
the borrowers are credit worthy. So it's all this.
40:09
So credit actually comes that way.
40:13
Which enters into the system obviously there's also
40:16
government spending, but government spending is a
40:18
proportion of the of these two line items, so to speak is
40:23
actually in the minority. So there is no authority that
40:27
can actually control money supply.
40:29
What they try to do is manage system liquidity, right, which
40:33
is what taxes is all about. And and so when when taxes are
40:38
imposed. Oh, and temporary system
40:41
liquidity management tools as well, which is what financial
40:46
products is all about, right. You know, give me your U.S.
40:49
dollars in exchange, I'll give you something which allows you
40:51
to make a claim on something or other down the track, whether
40:54
it's shares, whether it's options, whether it's a contract
40:57
for difference, whether it's it's a debt instrument like a
41:01
well federal government back bond.
41:03
It can be any of these things, but they're trying to drain
41:06
dollars out of the system at the same time.
41:08
So if you imagine an economic system has a bunch of buckets
41:13
and pipes, you've got all these taps everywhere pouring in, and
41:17
then you've got to drain it because the buckets are, the
41:20
buckets do grow, but they can only grow at a certain rate.
41:23
And if you've got too much flowing, eventually things
41:27
overflow. So they're creating new buckets
41:28
as well, right? So this, so you know, finance is
41:31
fantastic for this because it actually doesn't take much
41:35
effort all time to create a financial instrument regulated
41:38
as it is. Suddenly you've got a new
41:40
financial instrument, a whole bunch of institutional liquidity
41:43
gets poured into it and so it drains money capital out of the
41:48
system again in exchange for an interest rate.
41:50
So this is what they're constantly trying to do, trying
41:53
to at an aggregate level manage liquidity levels, not always
41:57
successfully. But the other feature of this
42:01
circulation system is that most of this circulation literally
42:07
circulates to the top and, and, and that in and of itself
42:14
depletes the real economy of, you know, the, the, the money
42:18
capital that could be used to mobilize real resources.
42:22
So because those who accumulate money, capital and actually end
42:28
up accumulating masses of fictitious capital assets, you
42:33
know, the, you know, claims on the future rights, not that much
42:39
of it goes in relatively speaking, goes into significant
42:43
renewable renewing of fixed capital, you know, factories,
42:49
machines and all that sort of stuff.
42:51
But professor, what about trickle down economy?
42:54
I mean, doesn't the wealth start trickle down from the top to the
42:57
bottom? That's a great theory, you know,
43:01
for those, for those who have the wealth.
43:04
And it's a very bad reality for those who have to suffer.
43:10
Yeah, that, that, that, that's fair.
43:13
What, what? How would let's say, let's say
43:15
how you know, the Trump reaction is apparently attempt to try to
43:22
fix the mess the US is in, and it's so far not very successful.
43:28
What would is it possible at this point to fix the structural
43:33
problems that US faces, you know, with a highly
43:36
financialized economy, lots of vested interest and almost great
43:43
lot lot political system? Is there is there any hope for
43:47
for reform? Look, it's very hard for softly,
43:52
softly reforms and even I think the efforts by this
43:56
administration, you probably wouldn't call them traditional
44:00
softly, softly reforms. But even that is really not
44:04
shaking the system structurally, right?
44:06
So in part it's premised on a misdiagnosis of the problem.
44:13
It sees symptoms, but it has misdiagnosed causes.
44:17
And so, for instance, it sees trade and trade imbalances as as
44:23
a problem to be solved, and it thinks you solve that by dealing
44:27
with relative prices via tariffs that will affect the flows at a
44:33
trade level. The problem is, is that trade is
44:36
really just a function of production distribution.
44:39
And you've got to go to the heart of the question, which is
44:43
if we're not, if we're buying lots of stuff, it's because
44:45
we're not making that stuff. Stopping this stuff coming isn't
44:50
the answer. We've got to figure out why it
44:52
is that we don't make this stuff and then figure out how it is
44:55
that we can make this stuff in a way that is comparable to the
45:00
stuff that we buy. And you've got to always come
45:03
back to fixing production systems.
45:05
And if and what are production systems, as we were discussing
45:09
earlier, they're just energetic transformation systems in large
45:11
part. So, so you've got to solve that.
45:15
You've got to, you've got to tackle this question of energy
45:19
systems in the long run. Once you can solve energy
45:21
systems in the long run, you've got a chance of solving
45:24
information systems that are energetic in part, but are
45:27
necessary to releasing the productive forces, so to speak.
45:32
None of that is part of the the agenda at the moment.
45:35
Now we can go into all sorts of things that make viable
45:39
production economies actually work.
45:42
You know, you need a workforce that has the right skills.
45:45
You need people with reasonably high levels of literacy and
45:48
numeracy. That's actually not what the
45:51
contemporary United States delivers.
45:53
It actually does the reverse, which means it has to pull
45:55
people in from around the world, which then exacerbates a bunch
45:59
of social problems because there are sections of the American
46:01
community that hate that idea. And so then you've got finance,
46:07
you know, given their druthers, finance capital will happily
46:11
trade for profit through financial instruments, then take
46:15
the punt on investing in a three to five year fixed capital
46:19
project where the returns are uncertain.
46:22
And so unless you can bring finance to heel and cause
46:27
finance to actually be committed to not just buying more capital
46:32
equipment and building a box around it, but committing to
46:35
investing in the people and the systems and the processes, none
46:39
of that's going to matter either, right.
46:41
So the accumulated problems that exist, the symptoms that people
46:47
are concerned about this, this has resulted from, you know, 40
46:52
to 50 years. You don't, you don't fix that in
46:55
four to five days. You don't even fix that in four
46:57
years. And you certainly don't fix it
47:01
by, in a sense, creating fights for yourself all around the
47:07
world, right? That actually doesn't fix your
47:08
problems. It might create some nice optics
47:12
politically. It in some respects mobilizes
47:16
this idea of a politics of nostalgia, right, as well as the
47:20
politics of cultural grievance. And, you know, it's either
47:25
equity this or it's woke that or what, what have you.
47:29
But it doesn't go to the heart of the problem, which is why
47:31
does finance capital have limited relative interest in
47:36
fixed capital formation and high end manufacturing and high end
47:40
industry as opposed to hiring financial engineers on Wall
47:46
Street, right? Unless you tackle that, how are
47:49
you going to fix this? You know, Besson talks about
47:54
Wall Street and Main Street rising together.
47:57
The reason why Main Street's in the hole that it's in is because
47:59
Wall Street has risen so much. You don't fix it by by thinking
48:04
you can leave Wall Street alone. The heart of the heart of the
48:09
American political economy today is that it's overly
48:12
financialized. There's lots of vested interests
48:15
attached to that. And now you've got the next
48:18
batch of rent seekers, basically, and they are your,
48:21
your technology oligarchs, right, who have very little
48:26
interest in commodifying their platforms, but they have a lot
48:31
of vested interest in building moats around them.
48:33
And I'm unlocking people in at high prices.
48:37
Well, Speaking of energy based, you know, there are countries
48:42
like China, but also previously like Japan and South Korea that
48:47
was energy poor, yet they were able to build a successful
48:52
modern economy Despite that. I mean which like USI mean
48:58
comparatively US is actually in a better problem in a better
49:05
position resource wise than either Korea, Japan or until
49:11
very recently China, right? I mean like like so.
49:15
So it doesn't seem like the energy is is all determinative
49:22
on how the the path of development of a of a state,
49:26
right, Because, you know, it's our example of Japan, Korea,
49:31
China, despite inner being energy poor and somehow was able
49:35
to build a modern industrial economy.
49:39
Well, it harnessed energy from elsewhere, right?
49:41
So it solved it solved its energy, its, its local energy
49:45
challenges. And of course, China's moving to
49:47
a point where it is solving them in a sovereign way as well.
49:50
So it's reducing the dependence on imported energy sources.
49:53
And look, if anybody if, if if people were given their druthers
49:57
and you, you know, you're playing the the world game and
50:00
you said, look, you know, there's all these places that
50:03
you could get. Where would?
50:05
Where would you? Choose well, I'll tell you,
50:08
North America would be one of those places that would be
50:10
chosen, you know, one of the first few.
50:14
What an amazing gift of nature. And and unsurprisingly, with
50:24
those gifts of nature, the United States as a population
50:28
grew. Obviously it as it moved W would
50:31
have killed a whole bunch of well, you know, it actually
50:34
engaged in what some historians have called the world's largest
50:37
genocide in terms of the American Indians.
50:41
But in so far as let's call it just economic wealth creation is
50:45
concerned, put it put everything else aside.
50:48
It's just one of the most amazing gifts of nature to to
50:53
have the opportunity to do something with certainly
50:57
compared to a bunch of other countries, You know, Japan's a
50:59
great example. It's energy poor.
51:02
It's it's food poor, it's topographically very difficult.
51:08
It's on earthquake fault line. You know, it's, it's one of the
51:15
last places you would choose if you wanted to have an easy
51:18
pathway to, to, you know, improving material conditions.
51:22
Yeah. Look, United States, look, I've
51:25
been accused actually of being a little bit more optimistic about
51:28
the US than some of my friends, which is a bit surprising to me
51:32
because I've never really been particularly optimistic.
51:36
But I just think that there are incredible raw materials.
51:40
Look, you, you yourself studied there.
51:43
You've spent time there. There is no doubt that it's a
51:48
country of 350 million people or so.
51:52
It's education systems are actually not, they're not in the
51:56
bucket yet. They're not, You know, there are
51:58
problems with literacy and numeracy.
52:00
There are problems with the economics of education.
52:03
But it's not like there aren't bright people.
52:05
There's lots of bright people. There's lots of raw materials.
52:09
There's lots of legacy infrastructure.
52:11
Some of it desperately needs upgrading, whether it's rail
52:14
lines or electricity systems or some of it's Rd. networks or
52:18
some of it's ports for that matter, that look like ports
52:20
from the 1970s. But, you know, compared to many
52:25
other countries in the world, this is still amazing stuff.
52:28
You know, a lot can be done. And I think the United States,
52:33
once it can become a normal country and be less obsessed
52:37
with being a global hegemon and less paranoid about the idea
52:41
that everyone else wants to do harm to the to to the United
52:45
States. If it can do all of those things
52:47
and focus a lot more on distributional issues and
52:50
institution building domestically, there's no reason
52:54
why it can't actually have an incredibly prosperous future.
53:02
I agree, unfortunately at the current, it's the current
53:06
political landscape, I don't see, I don't see any kind of
53:11
changes possible in the immediate future.
53:14
Maybe, maybe in a generations time, maybe in 20 years, 30
53:19
years, things might change, but I just don't see a path to
53:24
improvement within next two to five years.
53:28
Yeah, it's yeah, which is a. Portion economy with deep seated
53:35
vested interests with a political system that is that is
53:38
designed around the flow of money.
53:41
You know, 2 year electoral cycles, lobbyists coming through
53:45
the doors, revolving doors, the, the, the need for campaign
53:51
finance to actually play the game.
53:54
None of that is conducive to being able to tackle the issues,
53:59
you know, in, in essence, in a dispassionate way.
54:02
And that means that as times get more difficult, and I'm actually
54:08
quite certain that they will, the anxiety levels and the
54:12
public anger will rise and the short term political response
54:16
will be to raise more and more money to run the campaigns.
54:19
But the mandates are incredibly thin as a result.
54:22
And there isn't a politician that then is able to do
54:25
anything. You know, the, the electoral
54:27
system in the United States is, was designed 250 years ago
54:32
principally to favour small agrarian states, principally to
54:36
ensure that systems were largely gridlocked so that they couldn't
54:40
be radical change. And, and, and, and it also meant
54:46
because of the college system that these days a president is
54:52
elected with what is in effect about 30%, give or take of the
54:57
eligible voter base. That's it, right?
55:01
So that's a very, very thin mandate, if you can even call it
55:06
that. They might get a massive
55:08
winner's bonus at the college right?
55:10
Which makes it look like they've.
55:11
Romped it in. But when you actually look at
55:15
the votes across the country, you realize that a whole bunch
55:19
of folk didn't bother voting at all.
55:21
A whole bunch of voters didn't vote for the whoever became
55:25
president. And then you've got the rest.
55:26
And it literally is about, you know, a third that's not really
55:32
a base to do much with. And I think institutionally, the
55:35
United States is, you know, trapped again, You know, like we
55:40
were talking about with Japan, it's sort of tracked by its own
55:44
historical legacy. In ways that prohibits it from
55:48
tackling the problems of the 21st century.
55:53
Wow. OK.
55:53
I think that with that, we can wrap it up For people who would
55:59
like to follow you, Professor or Powell, where would they go?
56:03
If if if they're so inclined, go to Substack is probably the the
56:09
quickest and easiest 1. So that's my name.
56:12
Just look for me on sub stack, I think it's Warwick
56:14
power.substack.com or something like that.
56:18
And there's plenty of stuff there.
56:20
It's, it's all free of charge though.
56:25
I have been again, flattered by a bunch of people who've pledged
56:28
and I'm not really sure what to do about any of that at the
56:30
moment. Because I think information is
56:33
something that wherever possible, you know, I should at
56:38
least share it even if people think I'm mad or don't agree
56:41
with it, but at least it provokes conversations and, and
56:45
provokes thought processes and conversations like this.
56:47
So, so for the foreseeable future, it'll just be there for
56:52
those who are inclined to, you know, maybe spend, you know, 15
56:55
to 25 minutes reading the materials when I push them out.
56:59
I tried to do something once a week.
57:01
Lately I've published 2 things a week, but it's largely been a
57:05
response to immediate events which I don't want people
57:10
thinking that that's going to be the norm.
57:13
Well, for people who want to follow Professor Powell, go to
57:18
warwickpowell.substack.com and highly recommend, give him a
57:23
follow. Thank you again for making your
57:27
time and energy to come to our our podcast.
57:31
And this is I think we are, we are in a fast changing world.
57:35
And I do look forward to have you again on my show to speak to
57:40
us on on any upcoming events because many, many things have
57:46
to do your with your field of study actually.
57:50
And so this is very fascinating topic.
57:52
I could geek out on this for hours.
57:54
And I I look forward to our future conversations.
57:58
Me too. Well, thanks guys.
58:01
And thanks for listening to another episode of Silk and
58:04
steel podcast. Until next time, Bye bye.