Drones have already become a primary weapon, capable of taking out soldiers and tanks, as well as helping to spot artillery fire and provide a standard method of battlefield reconnaissance. Electronic warfare \u2014 the use of EM signals to disrupt drones\u2019 communication with their pilots and GPS satellites \u2014 provides some protection against drones for now, but once artificial intelligence improves to the point where drones can navigate themselves, even that defense will prove largely ineffective. This doesn\u2019t mean drones will be the only weapon of war, but it will be impossible to fight and win a modern war without massive numbers of drones. And who is building FPV drones, of the type depicted in Musk\u2019s video (a video showing drone swarms in China, declaring that the era of manned combat aircraft is over)? China. Although the US still leads in military drone production, China’s DJI and other manufacturers dominate the much larger commercial drone market: ![\"This](\"https:\/\/www.liberalglobe.com\/wp-content\/uploads\/2024\/12\/image-31-1024x772.png\")
And an absolutely essential component of an FPV drone is a battery. In fact, improvements in batteries \u2014 along with better magnets for motors and various kinds of chips for sensing and control \u2014 are what enabled the drone revolution in the first place. And who makes the batteries? That would also be China: ![\"This](\"https:\/\/www.liberalglobe.com\/wp-content\/uploads\/2024\/12\/image-32.png\")
<\/p>\r\n\r\n
Now imagine what would happen if the US and its allies were to engage in a full-scale war with China \u2014 as analysts say is increasingly likely in a World War III scenario.<\/p>\r\n\r\n\r\n\r\n
In the first few weeks, both countries\u2019 stockpiles of munitions \u2014 including drones and the batteries that power them \u2014 would be depleted. After that, as in Ukraine, it would be a case of who can produce the most munitions and get them to the battlefield in time.<\/p>\r\n\r\n\r\n\r\n
At that point, what would the US do if neither it nor its allies could produce munitions in large numbers? The US would have to choose between 1)<\/strong> escalating the conflict into a nuclear war or 2)<\/strong> losing the war to China. These would be the only options.<\/p>\r\n\r\n\r\n\r\n In either case, the US and its allies would lose. Now consider that the US and its allies are not just lagging behind China in drone and battery manufacturing \u2013 they are lagging behind across the entire defense industry. The chart below comes from a 2024 report by UNIDO, the United Nations Industrial Development Organization:<\/p>\r\n\r\n Economy and War<\/strong><\/p>\r\n\r\n\r\n\r\n All Western countries have struggled to respond to China\u2019s industrial onslaught, because as capitalist countries, they naturally think of manufacturing primarily in terms of economic efficiency and profit, unless a major war is underway.<\/p>\r\n\r\n\r\n\r\n The economies of democratic countries are structured primarily as free-market economies with redistribution, because that is what maximizes the standard of living in peacetime. In a free-market economy, if a foreign country wants to sell you cheap cars, you let them do it and instead allocate your own productive resources to something more profitable.<\/p>\r\n\r\n\r\n\r\n If China is willing to sell you brand-new electric vehicles for $10,000, why would you reject them?<\/p>\r\n\r\n\r\n\r\n Just build B2B SaaS systems and AI-powered advertising platforms and chat apps, sell them at a high profit margin, and drive a Chinese car.<\/p>\r\n\r\n\r\n\r\n The War Economy<\/strong><\/p>\r\n\r\n\r\n\r\n Except when a war comes and suddenly you find that B2B SaaS systems and advertising platforms and chat apps are not very useful in defending your freedoms.<\/p>\r\n\r\n\r\n\r\n The time to worry about manufacturing would be years before the war, except that you couldn\u2019t predict and prepare for the future. Manufacturing doesn\u2019t just support war \u2013 in a very real way, it is a war in itself.<\/p>\r\n\r\n\r\n\r\n Western countries seem to still be mostly in a \u201cpeaceful state\u201d in terms of their economic models. They do not yet see manufacturing as something that must be maintained and expanded in peacetime, in order to be ready for the increasing possibility of a major war.<\/p>\r\n\r\n\r\n\r\n In the US, they are waking up slowly\u2026 The tariffs accepted by the Republicans and the industrial policies pioneered by the Democrats are partial solutions, and key pieces of a military-industrial strategy are missing.<\/p>\r\n\r\n Neither Republicans nor Democrats have a comprehensive strategy for winning the war on manufacturing. A military-industrial strategy for the United States and its allies to confront China should include three elements:<\/p>\r\n\r\n\r\n\r\n 1.<\/strong> Tariffs and other trade barriers against China, to prevent a sudden flood of Chinese exports from the forced deindustrialization of other countries.<\/p>\r\n\r\n\r\n\r\n 2. <\/strong>Industrial policy, to maintain and expand manufacturing capacity.<\/p>\r\n\r\n\r\n\r\n 3.<\/strong> A large common market outside China, so that non-Chinese manufacturers can gain from the economies of scale of international trade.<\/p>\r\n\r\n\r\n\r\n The Republican approach to tariffs achieves the first of these prerequisites, but actively sabotages the third by imposing tariffs on allies.<\/p>\r\n\r\n\r\n\r\n The Democrats\u2019 industrial policy-focused approach achieves the latter, but it limits much of their own effort by imposing excessive regulations and requirements on export contracts.<\/p>\r\n\r\n\r\n\r\n In his first term, Donald Trump moved the US away from an unprincipled free trade consensus and away from a model of \u201cengagement\u201d with China as a top trading partner. He pioneered the use of both tariffs and export controls as economic weapons in a real, if invisible, trade war.<\/p>\r\n\r\n\r\n\r\n In his second term, he is almost certain to double (at least) the tariffs.<\/p>\r\n\r\n\r\n\r\n This will help protect other parts of American industry from being suddenly wiped out by a wave of subsidized Chinese imports \u2014 as happened to the U.S. solar panel industry in the 2010s.<\/p>\r\n\r\n\r\n\r\n But Trump is making a number of mistakes that will seriously limit the effectiveness of his tariffs.<\/p>\r\n\r\n\r\n\r\n 1. <\/strong>\u0397e is threatening broad tariffs on most or all Chinese goods, rather than tariffs that target specific, militarily useful goods. But blanket tariffs are of limited effectiveness. Blanket tariffs cause greater exchange rate fluctuations, which more than offset the impact of the tariffs.<\/p>\r\n\r\n\r\n\r\n Imposing tariffs on Chinese-made televisions, clothing, furniture, and laptops weakens their impact on Chinese-made cars, processors, machinery, and batteries.<\/p>\r\n\r\n\r\n\r\n 2.<\/strong> Trump is threatening to impose tariffs on U.S. allies like Canada and Mexico. That would deprive American manufacturers of the cheap parts and components they need to lower their production costs, making them less competitive against their Chinese rivals. It would also provoke retaliation from allies, limiting the markets available to American manufacturers.<\/p>\r\n\r\n\r\n\r\n 3.<\/strong> As for industrial policy, Trump doesn\u2019t seem to see the value in it. He has threatened to repeal Biden\u2019s Semiconductor Act, as well as the Inflation Reduction Act that subsidizes battery manufacturing.<\/p>\r\n\r\n\r\n\r\n But tariffs can\u2019t just\u2026 make semiconductor and battery factories sprout from American soil like mushrooms\u2026 Tariffs protect the domestic market, but they don\u2019t help American manufacturers at all in the much larger global market. Only industrial policy can do that.<\/p>\r\n\r\n\r\n\r\n Democrats support industrial policy.<\/p>\r\n\r\n\r\n\r\n And in fact, Biden\u2019s industrial policies have been one of the few small successes any Democratic nation has had in the struggle to keep up with China\u2019s manufacturing industry. A wave of factory construction is now underway in the US:<\/p>\r\n\r\n The construction of industrial plants is largely focused on industries subsidized by Biden, even though almost all of the actual money spent is from the private sector. However, the effort has slowed due to Progressive policy priorities.<\/p>\r\n\r\n\r\n\r\n Even more fundamentally, Progressives tend to see the point of industrial policy as providing jobs for factory workers, rather than in terms of national defense. This tends to make them complacent about delays and cost overruns, as they end up providing more jobs, even if they prevent anything real from being built!<\/p>\r\n\r\n\r\n\r\n Automation in Manufacturing and Artificial Intelligence<\/strong><\/p>\r\n\r\n\r\n\r\n This is also why some Progressives oppose automation and the use of robots in manufacturing, on the grounds that it \u201ckills\u201d jobs. China, meanwhile, is moving ahead with automation, having recently surpassed both Japan and Germany in the number of robots per worker, leaving America to see its\u2026 dust:<\/p>\r\n\r\n\r\n\r\n Meanwhile, while Democrats may be polarized into opposing all tariffs, they still oppose measures like the TPP that aim to create a common market capable of balancing China\u2019s domestic market. In other words, no political party in America has yet understood the nature or magnitude of the challenge posed by China\u2019s manufacturing power, or the nature of the steps required to meet it.<\/p>\r\n\r\n\r\n\r\n Trump is still dreaming the\u2026 simplistic protectionist dreams of the 1990s, while his Progressive opponents think of industrialization as a gigantic manufacturing program. Meanwhile, America\u2019s allies abroad seem even less able to prevent their looming decline. The manufacturing war with China is losing\u2026<\/p>\r\n","protected":false},"excerpt":{"rendered":" Drones have already become a primary weapon, capable of taking out soldiers and tanks, as well as helping to spot artillery fire and provide a standard method of battlefield reconnaissance. Electronic warfare \u2014 the use of EM signals to disrupt drones\u2019 communication with their pilots and GPS satellites \u2014 provides some protection against drones for … <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[200,59],"tags":[52,842,844,843,237,845,846,847],"class_list":["post-2478","post","type-post","status-publish","format-standard","hentry","category-developing-economies","category-proposed-fiscal-policies","tag-china","tag-defence-industry","tag-domnation","tag-drones","tag-economy","tag-manufacturing","tag-semiconductors","tag-war-economy"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/posts\/2478","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/comments?post=2478"}],"version-history":[{"count":2,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/posts\/2478\/revisions"}],"predecessor-version":[{"id":2480,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/posts\/2478\/revisions\/2480"}],"wp:attachment":[{"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/media?parent=2478"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/categories?post=2478"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/tags?post=2478"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"This](\"https:\/\/www.liberalglobe.com\/wp-content\/uploads\/2024\/12\/image-33-1024x601.png\")
In 2000, the United States and its allies in Asia, Europe, and Latin America accounted for the vast majority of global manufacturing, with China accounting for just 6 percent even after two decades of rapid growth. Just thirty years later, UNIDO predicts that China will account for 45 percent of all global manufacturing, matching or surpassing the United States and all its allies. This is a level of dominance in manufacturing by a single country that has only been seen twice before in world history\u2014by the United Kingdom at the beginning of the Industrial Revolution and by the United States immediately after World War II. It means that in a full-scale manufacturing war, there is no guarantee that the entire world, united, would be able to defeat China alone. This is a very dangerous and unstable situation. If that happens, it would mean that China is basically free to start any conventional conflict it wishes, without worrying about facing an alliance of superior powers – because there would be no potential alliance big enough to defeat it. The only thing it would have to fear is nuclear weapons. And, of course, other states will know this in advance, so in any conflict that is not strictly existential, most of them will probably make the logical choice to give China what it wants without fighting.<\/p>\r\n\r\n\r\n
![\"This](\"https:\/\/www.liberalglobe.com\/wp-content\/uploads\/2024\/12\/image-34.png\")
China\u2019s leaders know this all too well, of course, and that\u2019s why they\u2019ve unleashed\u2026 a massive and unprecedented amount of public spending to support industrial policy \u2014 in the form of cheap bank loans, tax credits, and outright subsidies. Increasing production in militarily useful manufacturing industries like cars, batteries, electronics, chemicals, ships, aircraft, drones, and semiconductors. This doesn\u2019t just increase Chinese production \u2014 it also creates a flood of excess capacity that spills over into global markets and forces American, European, Japanese, Korean, and Taiwanese companies out of business. By creating excess capacity, China is forcibly \u201cdeindustrializing\u201d each of its geopolitical rivals. Yes, this reduces profits for Chinese companies, but profit is not the goal of the war. America\u2019s most important economic partners\u2014Germany and Japan\u2014are bearing the brunt of China\u2019s latest industrial offensive. In the 2000s and 2010s, Germany\u2019s manufacturing exports boomed, as it sold high-tech machinery and components to China. China has now copied or reinvented much of Germany\u2019s technology and is now taking away export markets from the Germans. ![\"This](\"https:\/\/www.liberalglobe.com\/wp-content\/uploads\/2024\/12\/image-35.png\")
This is one reason\u2014though not the only one\u2014why German industrial production has been collapsing since 2017: Meanwhile, China has already snatched much of Japan\u2019s electronics industry, and now a flood of cheap Chinese car exports is destroying the famed Japanese auto industry: ![\"This](\"https:\/\/www.liberalglobe.com\/wp-content\/uploads\/2024\/12\/image-36.png\")
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