Latest / UK Column Radio / The Waning Days of the American Empire | Warwick Powell | Silk and Steel

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The Waning Days of the American Empire | Warwick Powell | Silk and Steel · UK Column Radio

0:01
Hello, and welcome to another episode of the Silk and Steel
0:04
podcast. I'm your host, Carl Zahn.
0:07
Today I have the crowd's favorite, Doctor, Warwick Powell
0:11
from Australia, joining me again on our regular show on China,
0:18
geopolitics and the decline of the US empire.
0:22
I think that's going to be the main focus of our show today,
0:25
yes. Yeah, I think so.
0:27
And there's been quite a bit happening again.
0:31
It seems that every couple of weeks there's enough to make us
0:36
go a bit greyer and also give us plenty to talk about and think
0:39
about. But I think we are seeing more
0:42
evidence of the waning days of the Empire as most of us
0:48
remember it and most of us have known it.
0:51
Not least of which, of course, is the the rebuke from the
0:56
Supreme Court of the centrepiece of the Trump administration's
1:00
economic policies, which in many regards wasn't just an economic
1:03
policy, it was the principal geopolitical lever.
1:06
And that of course, is the tariffs regime that was deemed
1:11
to have been unconstitutional. And, and I think that that is in
1:16
many ways, some people might interpret that as the as the
1:20
reassertion of the separation of powers, but I think in many
1:25
other respects it's actually a symptom of a decaying empire.
1:29
So yeah, I think it is going to be a core theme today, but may
1:35
not be the only thing we talk about.
1:37
Well, I actually Speaking of that, I actually wonder what
1:40
happened to all those countries that rushed to get a good deal
1:45
with United States. You know, all those countries
1:47
are lining up to like grovel and bow to Donald Trump hoping they
1:52
will get a better deal. And now the US core says, OK,
1:57
maybe the tariff, old tariff thing is ridiculous.
2:00
I mean, like, what does that do to the US credibility?
2:05
I mean, like, you know, all all these countries, all these
2:08
leaders, they spend a lot of political capital bowing to the
2:12
pressure of Washington, you know, making themselves looking
2:15
like, you know, dancing puppets or, or, or, or, or or, you know,
2:20
I or I would like to say dancing monkeys.
2:23
And, and now just for this whole thing to be thrown out by U.S.
2:28
court. How is anyone going forward
2:32
going to, you know, rush forward to a do another deal with United
2:36
States knowing that it might be not valid few months from from
2:40
from from the time it was signed?
2:43
Look, I think that that is the heart of the issue and that
2:45
really goes to the question of why the Empire is really
2:49
struggling. And that is that it is no longer
2:51
able to present to the world a dependable, credible, reliable
2:57
counterparty as a as a counterparty nation state.
3:02
And it shows itself to be not only capricious, willing to make
3:08
decisions on the fly, but often make decisions based on the
3:12
whims and the state of mind or the moods of the occupant of the
3:18
White House. And it makes it very, very hard
3:21
for anyone else in the world to develop a meaningful, sustained
3:28
posture towards the US. The one thing about countries is
3:32
that they actually move slowly, and it takes a long time for
3:38
national resources to be structurally aligned and for the
3:43
politics of countries to also become aligned around certain
3:47
national objectives. And when countries do this, they
3:52
actually rely upon the idea that others in the world are
3:57
operating in similar ways. You know, there is a a culture,
4:01
you know, people often talk about it as the, the norms of
4:04
international relationships or the norms of diplomacy.
4:08
And these norms aren't simply about niceties or being polite.
4:13
These norms are about creating an environment where the
4:17
behavioural response of others is reasonably predictable.
4:23
You can never predict others response absolutely, but you can
4:28
have a pretty good idea that if you conduct yourself in certain
4:33
ways, say certain things, and do certain things, that others that
4:37
you interact with will respond in a particular way.
4:41
What the United States has done in the last 12 months and
4:45
arguably really for the last 10 years, has overturned the
4:51
predictability of its own behaviour within the system at
4:55
large. And the minute it does that, it
4:57
actually says to everybody else, steer a wide berth.
5:01
Currently, they're behaving in an unpredictable way, an
5:06
unreliable way, liable to weaponize things, liable to chop
5:11
and change their minds on things, liable to verbal you,
5:15
you know, make announcements about what you might have said
5:17
in a closed door meeting, even if it's not entirely true.
5:21
And so I think it's going to create an even greater sense of
5:25
caution amongst countries around the world, especially, as you
5:29
say, those who rushed off to sort of get ahead of the pack
5:33
and do a good deal. You'll remember that after the
5:37
liberation tariffs were announced, people like Lutnick
5:42
and Scott Besant were running around the world more or less
5:46
trying to create this sense that there were countries lining up
5:50
ready to do the deal. And of course, what they were
5:53
trying to do was to create a sense of urgency.
5:56
You know, this idea that first in best dressed, fear of missing
6:00
out. The lesson we're now learning is
6:03
that being first in does not mean best dressed.
6:06
And in fact, quite the reverse. Taking your time, sitting back
6:11
and being patient and letting the mess that is contemporary
6:15
American governance unfold is probably your best strategy.
6:20
And on top of that, whilst you do that, you begin to diversify
6:25
your relationships. Because I think that there is no
6:27
doubt that contrary to the rhetoric over the last five or
6:32
six years about de risking and friend shoring and all these
6:36
things in relation to China, the most likely de risking move that
6:41
we're going to see over the next three to four years is actually
6:44
countries finding ways of disentangling themselves from
6:48
the United States. They're not going to do it in a
6:50
way that, you know, cuts off their nose to spite their face.
6:56
And they're certainly not doing it in ways that burn bridges.
6:59
They're doing it ways in ways that will protect themselves
7:02
from an unpredictable, unreliable, capricious, vanity
7:08
driven, narcissistic administration.
7:11
And that's where we're at. And I mean, we, we have already
7:16
seen that happening, you know, before Scott Besson actually
7:20
said, we are aligning all the world, all the countries of the
7:24
world. We're going to isolate China.
7:27
And, and like you say, exact opposite has happened.
7:30
Now. We have seen Carney visiting
7:32
China, Starmer visiting China. The, the, the, the German
7:37
Chancellor is now going to China and Trump himself is going to
7:42
China in, in April. And we have seen increase
7:47
investments into China by large multinationals.
7:52
And, and, and yet, you know, this is, I think it's, it's kind
8:02
of sometimes it's hard to, you know, to, to parse the, the US
8:07
rhetoric because a lot of time it's just rhetoric, You know,
8:10
like the US politicians, they, they lie like, like fish in
8:14
water. You know, that that's, but, but
8:17
sometimes it's kind of hard to figure out what is their end
8:20
goal? What is really they're trying to
8:22
achieve? What do you think they were
8:24
trying to do, you know, try to, you know, say like what, what,
8:31
what we're squeezing China, where we're lining against
8:33
China. We're cutting off all ties and
8:38
and, and, but, but, you know, with all this effort, end up
8:42
falling flat on their face. Look, I think the United States,
8:46
particularly inside the Beltway, are trying to achieve a
8:51
rekindling of primacy. The idea of American
8:56
exceptionalism and the idea of global power entitlement has
9:01
become such an ingrained part of the ways in which Washington
9:06
thinks about itself and the rest of the world that the idea that
9:09
that's not how the world works isn't something to recognise as
9:13
fact, but it's something to resist.
9:15
And in resisting that, of course, they are confronting
9:18
realities. I think we've discussed before
9:20
that Marco Rubio, for instance, amongst others, has talked about
9:24
this idea that the world is now multipolar.
9:27
Now that's a very particular sense of multipolarity.
9:29
And from the United States point of view, it basically means that
9:32
they are recognizing that they don't have unlimited resources
9:36
and need to calibrate their resources as well as mobilize
9:39
the resources and risk appetite of so-called allies in the
9:43
pursuit of the same objective. And the same objective is
9:46
American primacy. Now, at the moment, American
9:49
primacy is viewed largely through the prism of containing
9:54
China. If China wasn't rising, if China
9:57
wasn't actually a peer competitor in terms of economic
10:01
and technological capability, then American primacy would
10:05
still be there. I don't think the Americans view
10:08
Russia as a threat to American primacy.
10:11
In fact, quite the opposite. They've viewed Russia for a long
10:13
time as as a fallen power. And had Russia not got the
10:20
largest arsenal of nuclear weapons, I don't think the
10:23
United States would care much at all about what goes on in Russia
10:27
and certainly hasn't. I think the story's changing a
10:29
bit now. There is a grudging respect that
10:32
the Russians are at least back to the main table.
10:37
And but there's only one real threat as far as those inside
10:42
the Beltway is concerned, and that's China.
10:44
So the United States remains committed, I think, to this it,
10:49
well, it's it, it is almost a religious sense of entitlement
10:54
to being, you know, not the primate in the system.
10:59
And it is really struggling. It's experiencing displacement
11:03
anxiety. And consequently, it lashes out
11:07
the, you know, that we've had the National security strategy,
11:10
National Defense Strategy, the entire tariffs concept was all
11:17
about containing China and exploiting the rest of the world
11:22
on in the name of writing historic wrongs, right.
11:26
So you've got to remember that from the point of view of the
11:29
United States today, it really sees itself as a victim, a
11:33
victim of its own benevolence and a victim of the the
11:36
outrageous behaviour of everyone else in the world taking
11:39
advantage of American generosity.
11:42
And and so it's seeking to settle the accounts and it sees
11:46
tariffs as a way of settling the accounts, right.
11:50
And now that's gone. I mean that that that sort of,
11:55
you know, centerpiece economically has been, I
11:58
wouldn't say delta mortal blow, but it's still it's been delta
12:01
massive credibility blow. Yeah, well, but all politics are
12:08
ultimately is domestic politics. And one of the biggest claim by
12:14
Trump administration is he's doing this, you know, he's
12:17
crying China, China, China. Of course, we know he's trying
12:20
to distract people from the domestic problems, but also he,
12:24
he one of his claim to win the American voter base is that he
12:29
will bring the manufacturing back.
12:31
Because as you say, he blames China for the hollowing out of
12:37
the US manufacturing base, which actually got carried out by his
12:41
buddies like, like, like Lutnick and Besant.
12:47
You know, all these Wall Street guys were now staffing his
12:50
cabinet. These are the guys who over the
12:53
the period last four decades has intentionally hollow out the US
12:58
manufacturing in order to give the big fat middle finger to the
13:02
unions and, you know, to chase better profit margins elsewhere.
13:07
And, and of course they would never point the fingers to
13:09
themselves, though. It's it's going to be China,
13:11
China, China. But to that aim, though, to, to,
13:15
to, to Trump's claim that he will reindustrialize America, It
13:22
doesn't look like it doesn't look like it's, it's, it's
13:26
bringing the manufacturer manufacturing jobs back to the
13:30
United States 'cause even whatever new new manufacturing
13:37
capacity was added in USA, lot of the latest addition are
13:41
automated that require very few people.
13:46
And that that's the direction, by the way, they're actually the
13:48
administration actually pushing for, you know, they're pushing
13:51
for more investment into AI, which would replace even more
13:56
people. So how do you, how do you square
14:00
that? You know, I mean, like this is
14:03
the should be the challenge for the Trump administration.
14:06
You know, they're they're the way they tried to square is to,
14:09
you know, output more lies. But how how do you think?
14:14
What is your take on how that is that is going?
14:17
Well, the first thing I'll say is that I think your
14:20
observations are, you know, exceptionally, you know,
14:24
cynical, you know, and, and, and, and not tempered by
14:30
realization that all good things take time.
14:33
You know, the idea that evidence is being used to, to, to suggest
14:38
that the grand ambitions and the promises of this particular
14:41
administration aren't coming true.
14:43
You know, I mean, that's, that's, that's a shocking thing
14:45
to be doing, Carl, you know, have faith, you know, and you
14:51
know, all good things come to those who wait and pray.
14:56
Well, probably not. Actually in this case, the the
15:00
evidence is appalling as far as the objectives are concerned.
15:04
You know, the objective was, as you say, to rejuvenate American
15:08
manufacturing. It's not happening.
15:10
Employment in American manufacturing has been declining
15:13
actually in the last 10 months, ever since Liberation Day
15:16
tariffs were announced. The only jobs that have been
15:20
growing or the only sectors in which jobs have been growing has
15:22
been in private health and private education, followed by
15:25
services industry. This is not what the the
15:30
administration promised. And of course they could never
15:33
deliver on the promise. The kinds of jobs that I think
15:36
they created the impression that they cared about, you know, the,
15:40
the good, hard working, honest, blue collar jobs that people
15:46
have as part of their imaginary of, you know, the good times of
15:50
the 1950s. And maybe even in the
15:53
president's view of the world in the 1890s.
15:57
Those kinds of jobs don't really exist anymore, certainly not in
16:01
first world countries. And they're not going to come
16:04
back unless you want to reduce your living standards.
16:07
And if you want to reduce your living standards and if you want
16:10
to compete against the workers of Bangladesh and make the
16:13
T-shirts for Americans again, then I guess there's a way of
16:17
doing that. And that is to crush American
16:20
living standards and get the cost of labour down to levels
16:23
that are once again competitive in labour intensive jobs.
16:28
The jobs that will come into the future, amongst other things,
16:31
are going to be technologically driven.
16:34
They're going to be heavily dependent on robotics and
16:37
machinery. And, and they will require
16:40
certain kinds of people, Carl, you know, they'll require
16:42
educated people to operate, to set up, to support and maintain.
16:49
And those kinds of people, the ones with university degrees,
16:54
with reasonable levels of numeracy and literacy, are the
16:59
kinds of people that the American education system has
17:01
not been producing at sufficient quantity for 40 years.
17:05
So the system has some work cut out for it.
17:08
The the other thing to remember is these kinds of jobs and these
17:15
kinds of technologically driven rejuvenations are ultimately
17:20
going to need imported machinery and equipment anyway.
17:23
So the idea that you're going to add a cost to your industry so
17:29
that they can then become more modern is a great way of putting
17:33
a barrier in the road of your industries becoming more modern.
17:37
the United States simply doesn't make enough robots.
17:40
It doesn't make enough industrial and machinery that it
17:43
needs to fulfil these ambitions. And if it is to come close to
17:48
fulfilling its ambitions over the next 5 or 10 years, it's
17:52
going to have to import a hell of a lot of things.
17:56
And if it's not going to import them from China, where they'll
17:59
get the best price available, they'll just import them from
18:02
more expensive places like Japan, Republic of Korea, in
18:07
Germany. That's America's choice, right?
18:10
And but the economic policy regime revolving around tariffs
18:19
has some has failed. And, you know, maybe the
18:23
decision of the of the Supreme Court was a godsend because it
18:29
did give the administration an off ramp.
18:34
But right now, I don't think the administration views it as an
18:37
off ramp. Let's views it as red rag to the
18:39
bull. You know, how dare these six
18:42
justices, you know, reject the assessment of the administration
18:48
that America exists in such a state of economic emergency that
18:52
the president has these, you know, wide-ranging powers to
18:55
circumvent Congress. You know how they they do that.
18:59
And so right now it's clear that the president is looking for
19:03
alternative mechanisms. And there are other legislative
19:06
authorities. They're not as open-ended and
19:09
they have more conditions attached.
19:11
But you know, this, this president is not one for
19:16
turning. You know, to borrow a phrase
19:18
from Margaret Thatcher, you know, this man isn't for
19:22
turning. And I think we're going to see a
19:24
doubling down on tariffs over the course of the next 12
19:27
months, which of course makes it even messier for everyone else
19:31
in the world to return to your original point.
19:37
Yeah, go back to what you said earlier about, you know, the
19:44
good in the 90's the United States flooding from 4 parts of
19:56
Europe. That's how US power is in
19:59
industrial revolution. But right now they they are
20:03
also, you know, immigration is not popular now because.
20:08
The immigrants makes a perfect scapegoats for domestic problems
20:12
because they can't vote. So you know, the the, the, the,
20:15
the, the, the easiest way in the US politics to to shift blame is
20:19
you blame China and you blame immigrants.
20:22
And that's why he has sent the ICE agents all over United
20:26
States to to make a public spectacle of not just running up
20:31
of immigrants, but also, you know, shooting native born
20:33
Americans were for protesting this this policy.
20:38
So so in a way, Trump is destroying the foundation of the
20:45
Usus economic miracle from all angles.
20:50
You know, he's, This is why I always say Trump is the greatest
20:53
president of the United States or China, because he just
20:58
accelerates the, the US decline on unimaginable scale.
21:02
But what, what, what can we look forward to?
21:05
You know, because that does mean a increasing instability.
21:12
You know, like I contrary to a lot of, you know, pundits from
21:16
the West, they, they think they, they tend to think, oh, China is
21:20
trying to gaming United States the same way the US is trying to
21:25
contain China. That China would wish, you know,
21:28
for chaos in United States that that couldn't be further from
21:32
the truth because China would rather have United States as a
21:35
stable country. So you can continue to do to
21:38
have trade relationship with instability in United States is
21:43
actually, you know, it's not the either the goal or intention of
21:49
China at this point, because the goal of China ultimately is to
21:52
grow China and the grow continue growing prosperity for the
21:56
Chinese people within China. What what happens to the
22:00
outside? That's, you know, that's not
22:02
part of the radar. And but, but even from that
22:06
point of view, China always prefers stability because
22:09
stability is better for trade. Well, stability is better for
22:13
just about everything. As I mentioned earlier, part of
22:18
the ways in which countries navigate the world, because
22:22
countries, you know, can't just chop and change.
22:25
You know, they're big systems, you know, lots of resources to
22:28
mobilize. And once resources are
22:30
committed, countries are also quite path dependent for a long
22:33
time. And so This is why countries
22:35
make decisions in very deliberate and slow ways.
22:37
Institutions get built, policies have, you know, long term
22:40
continuity. Even when you know, the
22:44
politicians change, you'll realize that 8090% of policies
22:48
actually continue through administration after
22:50
administration after administration.
22:52
And you know, whether it's because of the permanent state,
22:56
the deep state, the machinery of government, or what have you,
22:58
right. But there is a continuity of of
23:01
a national system, it's political economy, it's social
23:04
settlement patterns. And so stability is necessary to
23:09
enable you to make these kinds of decisions because you need to
23:12
have, to the best extent that you can, an ability to
23:17
anticipate what the next 5 and 10 years are likely to look
23:21
like. And a good way of not being able
23:25
to do that is to have, you know, one of the largest players in
23:29
the world behaving erratically. If if they're behaving
23:33
erratically and you don't know where they're going to land, you
23:36
don't know whether it's going to be a 10% tariff, a 15% tariff, a
23:40
50%, a 60% exemptions on this and that today.
23:44
And and then, you know, imposing tariffs on some other country
23:47
because, you know, the Prime Minister said some nasty thing
23:51
about about the hockey team or something, right?
23:53
Whatever it happens to be, you know, none of that makes
23:56
decision making easy for countries.
24:00
It also makes them very difficult for organizations that
24:04
are responsible for the deployment of capital and to
24:08
transform that money capital into fixed investment.
24:13
You don't build factories in 2 minutes and 1, you know, they
24:17
take time. And once they're built, they
24:20
need to operate for a certain amount of time at a certain
24:23
level of capacity utilization for them to be economically
24:26
viable. So you don't want to be building
24:29
factories on a whim and then shutting them down next year
24:31
because circumstances have changed.
24:34
And, and if you're building major infrastructure like ports
24:38
and roads and electrical systems and information technology
24:42
systems, you also want a relatively predictable
24:46
environment. Energy is a classic case in
24:49
point. You know, the last thing any
24:52
country wants, China included, is an environment where global
24:56
oil prices are highly volatile. That's very difficult.
25:00
Great for traders. Traders trade the volatility,
25:04
but it's actually not great for corporations trying to navigate
25:07
the future, to plan the future for the next 6 months, 12 months
25:12
or two years or even longer. So China has very little
25:16
incentive, actually, for a United States that is wracked by
25:20
persistent instability and political indecisiveness, the
25:25
lack of clarity. China, I think, would prefer a
25:29
hostile country that is consistently hostile than one
25:33
that is chopping and changing. At least you know what you're
25:36
getting, right? But at the moment, the United
25:39
States is not only hot and cold, you know, but it's lukewarm.
25:44
It's, you know, and it's hot and cold to different people each
25:48
and every day. Maybe that works when you're
25:51
negotiating a piece of dirt on Manhattan, you know, keeping
25:55
everybody off balance. Yeah, that's in the pow, Doctor
25:59
Powell. That's that's called the art of
26:01
the deal. Doctor Powell.
26:03
You keep your, you keep your opponents off balance because
26:07
they will never know what you're going to do.
26:09
That's why you raise the demands insanely high.
26:12
So to keep them off balance. Pow, it's it's all working.
26:15
It's all part of the. Plan So what does China do,
26:17
Ryan? You know, big countries actually
26:19
don't just hop, right? So China then says, look, if
26:24
we're facing an environment that is likely to be quite fluid,
26:29
that's likely to have episodes of, you know, stormy seas, so to
26:33
speak, we're going to need to batten down the hatches and
26:39
chart a clear and steady path. We accept that we're going to
26:44
hit some big waves. We know that there are some
26:47
storms, right? They're not going to be
26:50
avoidable. So we're literally just going to
26:52
have to put our head downs, batten the hatches, tie things
26:56
down and get ourselves through this and hopefully in the
27:00
process come out the other end as unscathed as possible.
27:04
And in saying that, what China is saying to the smaller boats
27:09
around, and, you know, this is the kind of analogy that you get
27:12
a lot, I think, from the Chinese leadership these days, which is
27:15
that, you know, we're big boats on the same big ocean, right?
27:19
And it's saying to the smaller boats, rough seas coming up, the
27:26
best strategy for you to survive is to latch yourself to us.
27:31
We are the biggest ship. We will give you an anchor point
27:36
and hopefully you won't get drowned too much.
27:40
Of course, big waves are going to hit you anyway, so we can't
27:44
protect you from every wave, but we will do our best to make sure
27:49
that you don't get submerged and that you will also come out the
27:53
other end a bit battered, but in a position then to take
27:58
advantage of the sunnier, calmer days.
28:02
And that, I think, is the position that the, you know, the
28:07
political leadership in Beijing have ultimately arrived.
28:10
That is, you can either try to anticipate every possible
28:15
chopping and changing that the United States might undertake
28:19
over the next, you know, year or two or three, or ultimately
28:24
establish a, a course of action at a macro level and stick to
28:30
your position. And they did this, of course,
28:32
through the tariff wars last year where they just said, look,
28:36
you know, we support open trade. We think that that's what you
28:38
should be doing. We don't think it's in your
28:40
interest. It's not in ours going down this
28:42
crazy tariffs path. But you know, every 10% you add
28:48
on to the products from our country will add 10% on to
28:51
products from your country. And then we'll see where this
28:53
all ends up. Now we know where it all ended
28:56
up. It ended up winding the clock
28:58
back to the 1st of April, right? So, so that's where I think
29:02
China is now at is it's, it's, it's just not going to chop and
29:09
change in a reactive way to the United States.
29:12
It's literally set a course. It's got a, a strategic
29:15
direction, broad direction over there.
29:20
It has mapped out, I think a, a pathway, a road map, if you
29:25
will, that is encapsulated in some things that is available
29:30
for everyone to see. The development initiative, the
29:33
security initiative, the governance initiative and the
29:36
civilizational initiative. They're all there for people to
29:39
see and the digests and to interpret.
29:43
But ultimately, you know, that's the path that China is laying
29:47
out and and it's inviting people to, you know, tie their boats to
29:54
the big boat to to weather the storm.
29:58
Well, that's interesting because I just saw a clip on Twitter.
30:02
This is a statement by volunteer CTO Xian Sanker.
30:08
He actually echoes some of the sentiment that you you said
30:12
here, you point out here, he said China is the best at long
30:16
term planning. But then he goes on to say the
30:19
one thing that's not in their plan was AI.
30:22
It is American innovation, American phenomena.
30:26
So that then he goes on to say he say, like everything is
30:32
upstream from energy, right? In America, we have we have all
30:37
these private entrepreneurships that's leading them to create
30:42
like for example, gas power turbines to power their data
30:46
centers to build all that. I'm thinking, wait, this is what
30:51
Doctor Powell has been saying all along.
30:53
But this guy is obviously smart enough to recognize, you know,
30:58
that everything is upstream from energy, but he also must have
31:02
no, that China has much, much cheaper price for energy because
31:07
China has been putting a lot of effort, you know, as he said,
31:12
into long term planning of building out their energy grid
31:16
for diverse source of energy, not just hydrocarbon, but solar,
31:21
wind, nuclear. And now their, their solar
31:25
expansion is, is rolling out an exceptional fast basis.
31:30
And, and, and it's, it's at the point where, you know, the solar
31:34
energy is quite very, very cheap and China has abundance of
31:40
energy to put to power its AI revolution, if China choose to.
31:46
I mean, these guys, this is what I don't understand.
31:49
You know, we have talked about this, that, that there's a
31:51
basically a finance capital and tech capital capture of the
31:55
White House in United States. You know, Xian Sankar of
31:59
Palantir, he represents part of that tech capital, you know,
32:02
backed by Peter Thiel and, and, and all these, these people who
32:06
actually have a very profound influence on the US politics
32:10
today. He must have recognized this,
32:13
But somehow he phrased this as saying no, this is a win for
32:17
America because you know, the all the the DeepSeek, all they
32:22
do is just steal from us by like distillation from our models,
32:26
you know, like, which is not another American copium.
32:30
Go ahead, go ahead, go ahead. Well, let let's follow the the
32:33
logic in a very typical American pattern.
32:36
Let's say that that's all true. Well, the other thing we know
32:39
that's true is that China are great thieves, IP thieves and
32:43
are great emulators and will turn whatever they've stolen
32:46
into something bigger, faster and and more widespread.
32:51
So whichever way he wants to look at it, the United States is
32:56
on a hiding to nothing, you know?
32:58
You know, thank you very much for inventing AI.
33:01
We'll now scale it and make it cheaper.
33:05
So it's a nonsense, of course. Yeah, sure.
33:09
Look, the United States has, of course, been one of humanity's
33:14
most vibrant, innovative societies for many decades.
33:20
You know, it's a big place. 300 and 3300 and 40 million people.
33:26
It's unsurprising that a large number of people also can
33:30
mobilize a bunch of creativity, right?
33:33
And the United States, I think has demonstrated that as a
33:37
society, it does have the capacity to be very, very
33:40
creative. China also has a capacity to be
33:44
creative too, but of course in a different institutional and
33:47
historical setting. It's creative in different ways.
33:51
And unfortunately, much of the Western discourse has
33:55
misunderstood Chinese innovations because it's had a
33:58
very simplistic view about innovation.
34:00
It it turned innovation or the idea of innovation into an
34:04
ideological trope as a manifestation of societal
34:09
freedom or market economies or whatever it happens to be, as
34:13
opposed to understanding innovation as a way in which
34:17
human creativity responds to challenges, blockages, as well
34:23
as, you know, imagined opportunities.
34:26
So one of the things about human beings still is that we are
34:31
incredibly creative beings. This, in some ways is the
34:37
differentia of what it is to be human as opposed to what it is
34:41
to be machine. So I guess some of the
34:44
developments in AI might, you know, arguably begin to at least
34:47
challenge this at a superficial level.
34:50
But at our core, human beings are creative beings.
34:55
And there is no reason why Chinese beings, human beings,
35:02
are more or less creative than American human beings.
35:05
But they're creative in a different setting.
35:08
China has been able to find ways of solving all sorts of
35:14
practical problems, not just inventing things, but sometimes
35:17
you can invent things, but it doesn't go anywhere, right?
35:19
You can have an idea, but it doesn't go anywhere until you
35:22
can figure out how to overcome the blockages to those ideas
35:26
becoming more real, whether it's through scaling, whether it's
35:29
through application cases, whether it's by unlocking a, a
35:35
raw material that you needed to make something happen at scale
35:38
that you couldn't unlock before. And sometimes you had to bide
35:42
your time because certain technologies, whilst
35:45
theoretically feasible, you know, from a, a physics point of
35:48
view or a chemical point of view, couldn't be done in the
35:51
real world because we simply didn't have the machines to do
35:55
it. And as time goes by, grabbing
36:00
onto this foundational research. And of course, now China is
36:03
producing a whole bunch of its own foundational research.
36:06
So the next generation will see a lot more Chinese go to WOE
36:11
innovation, I think, than we have in the last generation.
36:14
So the current generation is saying, I think a lot more
36:17
application innovation. Yeah, there are other ones where
36:20
you would say that genuine inventions have emerged in the
36:25
Chinese context, but I think we're also seeing very important
36:29
innovations in applications. How do we turn ideas into
36:32
reality is as much an innovation challenge as it is coming up
36:36
with the ideas themselves. And so if our friend at Palantir
36:41
wants to talk about China in those sorts of senses, I guess
36:44
at at a certain level, Karl, there must be a deep seated
36:48
recognition that the Chinese system, the social settlement,
36:53
the political economy, the systems of governance that it
36:56
has in place are adequate and possibly more than just adequate
37:02
to drive China forward as a modern technological society.
37:08
A friend of mine once described to me the difference between
37:11
being a a leading or a technological leader versus
37:17
being a leading technological society.
37:20
And he said to me that America is some way still the former,
37:25
that it is a technological leader.
37:28
But there is no doubt now that China is the leading
37:32
technological society And, you know, and, and that that is what
37:37
I think, or at least certainly is one of the factors that
37:41
compounds the anxieties that now, you know, 'cause those on
37:47
Capitol Hill to have sleepless nights and perhaps, you know,
37:51
has a few more medics on call in case they cause themselves an
37:55
aneurysm at some committee hearing when they hear about the
37:58
next Chinese security threat. Yeah, I mean, the the the one
38:04
example is Pebble based Thorian nuclear reactor that that
38:09
concept was first developed in in Lawrence Livermore laboratory
38:15
in United States. But then US sat on it and did
38:19
nothing until a NASA scientist published it their their
38:24
research online and then Chinese took a look at it.
38:27
Hey, this is interesting. Let's try it.
38:29
And then China actually ended up to make make it work.
38:33
You know, they are now very close at be able to come carry
38:38
out the commercial operation, you know, which is more than
38:43
what US did, which is just building a prototype.
38:45
And that this is the same thing the, you know, now, now this
38:51
extends even into the military sphere because US has currently
38:58
the 6th generation stealth fighters in United States is, is
39:04
essentially just at the PowerPoint presentation stage.
39:09
Whereas China, they actually had a flown prototype.
39:13
And and you know that then that then you still have people
39:16
online say, oh, they still are. Oh, that's cool.
39:19
Of course, because they steal our technology, right?
39:23
And they, they stole everything. But yeah, China can adopt and
39:28
commercialized technology at a incredibly fast pace.
39:34
One reason is because they have the economy of scale.
39:37
They have that the whole industrial base, which United
39:41
States no longer have. And This is why I think US
39:48
elite, you know, including the the Palantir CTO we talked about
39:52
now have placed all their hope in AI.
39:55
You know, they're essentially, or I think what, what the the
39:59
pounder CTO, she I'm Sankar was trying to do is she's trying to
40:04
drum up for more investment into AI, which is growing into a huge
40:09
incipient bubble right now. And, and that the, the, the hope
40:14
is, you know what their, their selling point is.
40:17
AI revolution is going to propel United States.
40:21
To the next level, you know, far beyond China, so that China will
40:25
never be able to catch up. But that's why you need to put
40:27
more, even more money, even more billions of dollars into our
40:32
little AI projects so we can continually keep ahead of
40:37
China's progress. I'll touch on the IR stuff and I
40:41
think because I think that there is something quite interesting
40:44
about the, well, arguably a difference in approach to AI as
40:49
a, as a technology and as a technical frontier.
40:53
But on the Chinese industrial system question first, the
40:57
there's a few really important parts to this.
41:00
And obviously a lot of people write about it because it's a,
41:03
it's a bit of a puzzle and people want to understand why it
41:06
is that Chinese manufacturing has become so successful
41:10
globally, how it is that it can deliver products of increasing
41:14
quality at such low costs, etcetera, etcetera.
41:17
And without going through all of the literature and all the
41:19
various explanations, I think that there's a couple of
41:21
interesting points just to note. 1 is, is that there's actually a
41:25
bunch of good people, well educated, well trained people.
41:29
Without those, you actually don't get yourself to a position
41:33
where you can design the processes and the systems that
41:36
you need to optimize production. So that's the first thing.
41:41
Long term investments in people has actually laid the groundwork
41:44
for these industrial capabilities.
41:48
The second one is a sense that industrial capabilities is
41:53
actually an ecosystem problem, and the competitiveness of an
41:59
ecosystem is only as good as its weakest or its slowest point.
42:05
And So what you often find when you read Chinese policy
42:08
documents and you know corporate strategy documents is talk of a
42:12
need to find the bottlenecks and to relieve the bottlenecks to
42:17
smooth the flow. You know, the cardboard, you
42:23
know, the, the, the, the constraint points, the choke
42:26
points, because it's an understanding of the system as a
42:31
dynamic system that works best when things move smoothly.
42:36
That underpins the planning approach that the CEO of
42:40
Palantir talked about. You know, there's lots of, you
42:43
know, planning and then there's planning, right?
42:45
And a sensibility to systemic harmonization where the pieces
42:52
fit together well, where the resources, the information, the
42:57
the human skills, the finance or flows smoothly, the blockages,
43:04
the bottlenecks, the constraint points are progressively
43:08
overcome, you know, through work, through innovation,
43:14
through changing how we go about doing things.
43:18
That is what has contributed to Chinese manufacturing prowess is
43:24
that it doesn't just look at a single factory in isolation.
43:28
How do I make this factory work really well?
43:32
It understands that the factory works only as well as it's
43:35
upstream supply chain works and works only as well as it's
43:39
downstream. Distribution partners work and
43:42
works only as well as the finance flows work and only as
43:46
well as the New Labour force coming into the business to
43:49
bring in new ideas and to work on, you know, work in the R&D
43:53
labs or what have you. So there's a very strong
43:56
ecosystem perspective to it, which leads me, I guess, to some
44:00
thinking on this AI question, right, You're right.
44:03
You know, there is at the moment a big push for another round of
44:09
government support for the AI sector.
44:12
You know, we've seen in the last few days a concerted, almost
44:16
orchestrated, coordinated campaign from the major AI
44:21
houses in the US claiming that DeepSeek, you know, stole this,
44:26
that and the other, as if these LLMS didn't steal all of our
44:31
data on the Internet to train themselves.
44:34
You know, put aside the the sort of usual hypocrisy.
44:37
But this concerted campaign drumming up the fear that that
44:41
Chinese AI, one, has stolen stuff that plays well always,
44:45
and two, is stealing a March because they're subsidized and
44:49
they're thieves, means that Congress needs to open the purse
44:53
strings even more to American AI.
44:56
Now, why do they need that? Well, they need it because they
44:58
don't have a business model at the moment.
45:01
And it's the business model point of difference that I'll
45:03
come back to in a moment. But there's no business model,
45:06
meaning that they have not yet persuaded enough American
45:10
corporations that what they do is actually worth doing and
45:14
worth paying for. I saw a report in Harvard
45:17
Business Review, I think it was that surveyed 600 odd executives
45:23
and they're still wondering where the productivity gains are
45:27
in AI. They haven't got them yet.
45:29
Now, I get that there's some nuance in the arguments around
45:33
all of this. May be an individual employer
45:36
won't necessarily see these things for a while, but you
45:39
know, productivity gains are already starting to to take
45:41
place. But be that as it as it may, the
45:44
business model doesn't exist, which means these big AI houses
45:48
are burning capital like you wouldn't believe.
45:50
They, they remind me of Uber, right when Uber first came onto
45:55
the scene 15 years or so ago, there were a few other
45:59
competitors at the time. And to knock those competitors
46:02
out, it had to be the last man standing.
46:05
And to be the last man standing, it literally had to burn
46:10
hundreds and hundreds of millions of dollars of invested
46:13
capital before it turned positive revenue.
46:15
It took 13 years before Uber turned a profit and it could
46:21
only do that after it dealt with some of its competitors and and
46:24
cleared the market out. So you'll know that in Silicon
46:27
Valley, you know, one of the dominant investment theses that
46:32
that you find amongst venture capital is how does this become
46:36
a category killer? How does this become that
46:40
dominant player in a sector, a product class?
46:44
Because without that, there is no business model.
46:47
And AI in many ways has been funded with that mentality in
46:52
mind. It's also been funded because
46:56
underpinning that mentality, Karl, is this belief that AI is
47:04
the way that Americans in particular, as the pinnacle of
47:10
human achievement and civilizational accomplishment
47:13
and being closest to God, can emulate the power of God through
47:22
the creation of artificial general intelligence.
47:25
And once you've done that, then you can dominate the world,
47:29
right? So that's the push.
47:31
China on the other hand, which may not have invented AI, but
47:36
nonetheless seems to be mobilizing it quite effectively,
47:40
is now deploying AI capabilities into all sorts of sectors,
47:46
whether they're in the social sector, whether they're in the
47:49
legal environment to streamline the processing of court matters.
47:53
And of course, we've seen two very interesting application
47:55
cases in the last week. So over the course of Chinese
47:59
New Year, there's been some news come out on 2 fronts. 1 is at
48:03
one of the ports in southern China which has delivered the
48:07
first fully seamless integrated AI enabled docking of a major
48:13
container ship without a human being involved and the unloading
48:19
of the containers coordinated via AI seamlessly right?
48:24
Didn't use ropes to tie the boats up by the way.
48:27
Used Electro magnets to hold the the the container ships to the
48:32
port. Example #1 where AI was used to
48:37
navigate the ship in, bring it to port, line up where it needed
48:42
to be, and communicate and coordinate with the cranes to
48:45
take all the containers off. The second really interesting
48:48
case which I saw on our report the other day, is that an
48:53
estimate of about 10% of consumer purchases over the New
48:59
Year period was enabled by AI. People used AI to go and buy
49:05
things for them. I'd send the AI out to find me
49:08
the best deal, the quickest deal, the cheapest deal, or
49:10
whatever it happened to be 10%. That's unbelievable because a
49:17
year ago would have been 0% basically, and now we're
49:22
starting to see how AI is finding its ways into very
49:26
practical things. Now, you can see in these two
49:28
examples, there's no pretense that AI enables anyone to be
49:32
God, right? It just enables decisions to be
49:36
made quicker, right? To process more information
49:41
quicker. But there's no attempt to become
49:44
God. So I think that there's a
49:46
business model difference, there's a mentality difference.
49:49
And ultimately at the moment in the United States, because of
49:52
all of that, there's a business model problem where talking up
49:56
the China risk of the China threat is a fantastic way of
50:00
getting more government support, which I might add does one more
50:03
thing. And that is, is that it will
50:06
keep the share prices up for the remainder of the year before the
50:09
midterm elections. And I think it is in the
50:12
interests of the administration as well as in the interests of
50:14
the stockholders of all of these AI firms that that happens.
50:18
So I think we are watching currently one phase, maybe it
50:23
will be the only one needed this year, but maybe not of a pre
50:28
midterm election pump. That is very insightful because
50:36
I think one reason they really hate Chinese AI is because all
50:40
these Chinese China keep on releasing these large language
50:44
models and giving out for free the open source like that
50:49
completely destroy. Doesn't help the business model,
50:53
it doesn't help the business model, right.
50:55
So, so the business model, well, the original business model idea
50:59
was essentially to become the Uber to dominate the, the space
51:03
with the general model and then charge a lot for use of the
51:07
general model because you've built a motor around it.
51:10
The Moat got destroyed last year, a year ago with DeepSeek,
51:14
right? And it's just been, you know,
51:16
smashed ever since. So that model's gone.
51:19
What DeepSeek of course, did in doing that, and it's been
51:21
followed by Kimmy and all the others, is that it basically
51:24
said to the world, look, it doesn't actually take that much
51:28
in the scheme of things to roll out a general LLM, right?
51:34
And then to continually to improve at training and then
51:36
with inference and all those sorts of things, that bit anyone
51:39
can do with a bit of compute and a bit of money, right?
51:43
It's gonna be commodified. So we might as well commodify it
51:46
today. The challenge now is
51:48
applications. Now that there's these tools out
51:51
there, how do you actually deliver things that are of use,
51:56
right. And that's that's where the race
51:59
is. That's where the challenge is,
52:00
you know, whether it's in helping big ships dock, you
52:03
know, without whole armies of people, whether it's in enabling
52:07
consumers to literally, you know, find the best deal and
52:12
have things delivered when they get home, you know, will they be
52:16
the best uses of this technology in two or three years time?
52:20
Well, I don't know. But these are all the things
52:23
that will start to be tried, right?
52:26
As, you know, people come up with, you know, new innovative,
52:30
crazy ideas about how large language models and large
52:35
computational capabilities can assist humans to go about their
52:41
daily activities. The other thing that I think is
52:44
interesting in all of this is we've seen over the course of
52:47
the last year or so continued growth in the Chinese services
52:51
sector. And this is kind of what happens
52:54
when you've got material abundance in most of the urban
52:57
areas. You know, I mean, I don't think
52:58
that there's many people in urban China, you know, in tier
53:02
tier 1-2 and even tier 3 cities that are short of any of the the
53:06
sort of basic materials things that people have, right?
53:09
So what are they turning to? Well, they're turning to
53:13
services. And we see this in travel and,
53:18
you know, whether it's computer games and, and all sorts of
53:20
other things, right? But people are turning to these
53:22
intangible experiences as part of how they are going to start
53:26
to enjoy life in, in, in, in socialist China.
53:32
And as these services start to emerge, things like AI are
53:36
likely to, you know, play a greater role in the, in the
53:40
services supply chain, whether it's in the delivery of, you
53:44
know, VR experiences for people. You know, if you can't travel
53:48
somewhere today, we'll come and, you know, have a virtual
53:51
experience of something, you know, all the way through to
53:56
using AI to, you know, better plan a travel or a journey.
54:01
And of course, we have this massive growth.
54:03
And I think you've experienced it yourself.
54:04
You know, I've seen it in self drive tourism.
54:09
You know, 15 years ago, the idea that a Chinese person would jump
54:14
in a car, either their own car or go and hire a car or a camper
54:19
and you know, drive all over China on holidays.
54:22
It was unthinkable, You know, I mean, I had a friend of mine who
54:25
is one of China's early days hardcore outdoors guys, right?
54:34
You know, we call him a Drongbei Lao.
54:39
What was that? A gear junkie?
54:42
OK, He, he had all the outdoor gear.
54:45
He goes off climbing in the, in, in the foothills of the
54:49
Himalayas on the Citrone side, not far from actually, I suspect
54:54
he's probably gone to some of the places where, where your mum
54:57
and dad were right, you know, 4550 years ago.
55:01
He goes and climbs and hikes there all by himself anyway, you
55:05
know, back in the day he was unique, right?
55:10
He he, he was an outlier Today. You know, the people who are
55:18
doing these trips are, you know, growing in number and AII think
55:22
is going to play a role in that. It'll help with things, even
55:25
simple things like making sure that my journey reduces the risk
55:32
or actually eradicates the risk of not finding the next charge
55:34
point for my electric vehicle, right, right down to things like
55:38
that, you know, simple stuff, but it's totally practical.
55:44
I mean, it makes life enjoyable. Imagine being stuck in the
55:46
middle of nowhere with a flat battery, right?
55:49
Because you, because you, you, you didn't plan properly.
55:51
Well, AI will solve that. You won't worry about that.
55:54
You can just, you know, go and enjoy whatever you're doing.
55:57
So, so I think that there is a different mentality around AI
56:00
and the sort of changes in society that's happening.
56:03
American Society is not even there at the moment.
56:05
I think it's got a whole bunch of other challenges and
56:08
problems, many of which, of course, led to the response of,
56:11
you know, how do we bring back manufacturing?
56:14
But that sort of nostalgic turn isn't going to make America
56:17
great again. And, and at some point in time,
56:21
I'd hope that the United States will actually find a way to
56:28
charting a pathway to, to become a more prosperous country again
56:31
for more Americans and, and do so in a way that that reduces
56:37
its instabilities for everyone else.
56:42
Unfortunately, right now all I see is that in the response to
56:46
continue American decline is just the production of the Co PM
56:50
is going through the roof. That's the only sector of
56:53
manufacturing that US still far outpace China.
56:57
I just quote tweeted that that that Palantir CTO clip and I, I
57:03
just, I just said US OK US is fucked and then there's some guy
57:09
a blue check underneath the the reply says China is a generation
57:15
behind AI chip manufacturing. the US will reach AGI later this
57:20
year or next year. China will never reach AGI until
57:24
it changes backward policies and stops trying to force its AI
57:28
company to use domestically manufactured chips.
57:31
Once the USA reaches AGI, the tech gap grows exponentially
57:36
every year. China will never be able to
57:38
catch up. the US current massive tech military advantage will
57:43
become insurmountable. This is already happening.
57:46
China is stuck stealing and copying US weapon system from 30
57:50
to 80 years ago. It's most advanced military tech
57:55
Hypersonic glide vehicle are a copy of U.S. military weapon for
57:59
1955 Alpha Draco Wave Rider Hypersonic Glide Vehicles.
58:07
That is a typical response on Twitter.
58:10
What can I say, Karl? But QED, right.
58:14
It just proves what we've been talking about.
58:17
And, and you know, when you've got this kind of mindset, and
58:22
it's a funny mindset because that mindset actually says that,
58:25
you know, you know, there's a certain sense of national pride
58:28
and confidence, you know, and you can't knock someone too much
58:32
for that. But of course, it's also a case
58:34
of incredible delusion as well. And but fuelled by this sense of
58:42
national superiority, it's impossible to contemplate, in
58:47
fact, that someone else might offer something that is
58:51
comparable. Which of course, is a bit of a
58:53
paradox. Because if all of what that
58:56
response said was true, like genuinely true, then I wonder
59:01
why it is that so many Americans experience the levels of anxiety
59:06
that they do in relation to China.
59:09
And why it is that they all believe, whenever a congressman
59:13
talks about China, that it must be true and that we must all be
59:18
totally fearful of it. Because it would seem, based on
59:23
this particular assessment, that China doesn't have a hope in
59:27
hell. And, and there's actually
59:29
nothing to worry about. You know, AGI is going to happen
59:33
in the next 12 months. And once that happens, the, the,
59:39
the gap will grow exponentially. And you know, and, and that'll
59:43
be the end of the story. So it, it reads, it reads a bit
59:48
like, you know, the, the, the 21st century version of the end
59:51
of history, doesn't it? You know where?
59:54
Well, if history didn't end in 1991, then maybe it's going to
59:58
end in 2027 when AGI lands itself in America's lap.
1:00:06
On that, on that optimistic note, I guess we can wrap it up.
1:00:12
What if people want to seek you out on social media or
1:00:17
elsewhere? Where would they go, Doctor
1:00:20
Paul? They can find me at
1:00:23
warwickpowell.substack.com and I've got a couple of books
1:00:27
coming out in the next few weeks.
1:00:30
Thermoeconomics in a Time of Monsters is probably the one
1:00:34
that will be of most interest to your viewers.
1:00:36
The other one is sort of a more practical guide to addressing
1:00:40
supply chain risks and problems, which I wrote basically for
1:00:44
corporate executives and policy makers as a bit of a an easy to
1:00:49
read handbook. But but the the first one
1:00:53
hopefully tackle some of these issues in an interesting way and
1:00:57
that'll be out on Amazon in the not too distant future as well.
1:01:02
I look forward to that. Thank you again, Doctor Powell,
1:01:06
for making your time to speak to us.
1:01:08
And for our audience, thank you for watching.
1:01:11
Until next time, bye bye.