At some point you have to put your own boots on the ground....Niall Ferguson on U.S. entry into Ukraine War

Uncle Sam tries the old British way of war:
Pay others to do the fighting.

Bloomberg

6 hours ago

US Can't Pay Other Countries to Wage Cold War II Against Russia, China - Bloomberg

Niall Ferguson

@nfergus

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2h

Uncle Sam tries the old British way of war:
Pay others to do the fighting.
This tends not to suffice, even if you can afford it.

https://bloomberg.com/opinion/articles/2024-05-19/us-can-t-pay-other-countries-to-wage-cold-war-ii-against-russia-china

Biden Can’t Pay His Way Out of Fighting Cold War II

As Britain found out against Napoleon, at some point you will have to put your own boots on the ground. 

May 18, 2024 at 9:00 PM PDT

By Niall Ferguson

Niall Ferguson is a Bloomberg Opinion columnist. He is the Milbank Family Senior Fellow at the Hoover Institution at Stanford University and the author, most recently, of “Doom: The Politics of Catastrophe.”

Suppose They Gave a War and Nobody Came? was the title of cheesy 1970 film that captured the anti-Vietnam Zeitgeist. But suppose they gave a cold war and you couldn’t afford it? Half a century later, that is the question the US needs to ask itself.

The debate on Cold War II is heating up. On Tuesday I chaired a fascinating symposium on “Cold Wars” — plural — at the Hoover Institution in California. We gathered together, in person or over Zoom, a pretty good proportion of the leading historians in the field. After a day of debate, three different schools of thought had emerged.

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Those siding with me in believing that we are already in a second cold war included 

• George Takach, the author of Cold War 2.0, for whom the contest between the US and China is primarily technological; 
• Dmitri Alperovitch, co-founder of the cybersecurity firm CrowdStrike and author of World on the Brink, who shares my view that we are approaching a Taiwan Crisis as dangerous as the Cuban Missile Crisis of 1962; and the 
• Soviet-born historian Sergey Radchenko, whose meticulously researched To Run the World has just been published by Cambridge and argues that the USSR leadership was motivated more by historically rooted psychological insecurities than by Marxist-Leninist ideology. 

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It doesn’t take a huge leap to see similar insecurities at work in the minds of China’s Xi Jinping and Russia’s Vladimir Putin today.

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Bloomberg Opinion on X: "The Biden administration wants other countries to do its fighting in Cold War II, but that approach is economically crippling and rarely

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There are two distinct counterarguments. 

One — which I’ll call the Aspen Strategy Group/Harvard University view — is that the US-China relationship is not as bad as the US-Soviet relationship. That’s the line taken by Joe Nye and his Harvard Kennedy School colleague, Graham Allison, who met with Xi and Foreign Minister Wang Yi on a recent visit to China. 

“We’re serious about cooperating where we can, but at the same time competing vigorously in almost every dimension,” was how Allison characterized the relationship between Washington and Beijing in a recent interview.
"I am in you, and you are in me," Xi told Allison, which must have given the translator a nasty moment. 

"What did I mean?” the Chinese leader went on. 

“The answer is ‘engagement.’ Through communication and cooperation, the US and China can become closely linked.” It is this aspiration that lies behind the increasingly frequent use in Beijing of the old Soviet phrase, “peaceful coexistence.”

Then there is the Yale University/Hoover Institution view. According to Odd Arne Westad, professor of history at the former, and Philip Zelikow, a colleague of mine at the latter, the global situation today more closely resembles the world on the eve of one or the other of the world wars. 

In an excellent new piece, Zelikow argues that it is a comforting delusion — indeed, “wishful thinking” — to believe we are in a cold war with China. 

Rather, we confront a new Axis — China, Russia, Iran and North Korea — that in many ways poses a bigger threat than the Germany-Japan-Italy Axis of the late 1930s and early 1940s, or the early Cold War combination of the Soviet Union, China and the other communist-controlled states.

“The worst case, in a major crisis,” writes Zelikow, “will be if the United States and its allies commit to victory, animated by their own rhetoric and dutiful but ill-considered military plans, and then are outmaneuvered and defeated. It would be the ‘Suez moment’ for the United States, or perhaps much worse.” Regular readers of this column will know that I sometimes share this fear. 

For me, Cold War II is the good outcome. An American version of the Suez Crisis of 1956 — the abortive occupation of the Suez Canal by Britain, France and Israel — would be worse, in that such a humiliation over, say, Taiwan would signal the end of American primacy, just as Suez sounded the death knell of Britain’s Empire. Losing World War III would of course be the worst.

One of the most interesting arguments I heard was that there may have been more than two cold wars. What if the period before July 1914 was another cold war — one between Britain and Germany that ultimately turned hot because of miscalculations on both sides? That, it was cleverly suggested, would justify the designation “Cold War Zero.”

Well, if there’s even the possibility of Cold War Zero, should there also be Diet Cold War? 

Letting other people do the fighting is, after all, one of the four pillars of National Security Adviser Jake Sullivan’s grand strategy: “Help [fill in the blank] defend itself without sending US troops to war.”

In practice, that means channeling money and arms to key countries — Ukraine, Israel, Taiwan — and hoping they can hold off the new Axis powers without the need for American “boots on the ground.”

Unlike in Cold War I and the global war on terrorism, in other words, this time the US is seeking to avoid sending its own soldiers into battle. And this makes sense. If your debt burden is dauntingly high and set to keep growing even if you cut defense spending relative to GDP, you need Diet Cold War, in just the same way that overweight people opt for Diet Coke (and Ozempic).

This approach has plenty of precedents in European history — for example, in the 18th and 19th centuries, when Britain paid substantial subsidies to its allies in its wars against France, encouraging them to do the fighting. The disadvantage is that the “paymaster power” has less control over military events than if the armies were directly under its command. It’s also very problematic if the paymaster succumbs to Ferguson’s Law — which states that any great power that spends more on interest payments than on defense is not going to be great for very long.

The British imperial precedent is highly relevant to US policymakers, if they but knew. Paying other people to do the fighting was how the British Empire was built. Ever wonder why there were Hessians in the War of Independence? The system began in 1741, during the War of the Austrian Succession, when Prime Minister Robert Walpole paid £300,000 to the Austrian Empress Maria Theresa. The “subsidy” was increased to £500,000 in 1742. In 1745 the amount paid to British allies reached £1,250,000 — call it £34.8 billion ($44 billion) today, adjusting for inflation and for growth, as recommended by the very useful Measuring Worth website.

Why did the British adopt this mercenary approach to warfare? Because, in the words of Prime Minister George Grenville, it was “dangerous to our liberties as well as destructive to our trade, to encourage great numbers of our people to make the soldier craft their trade.”
This shrewd policy was continued in the Seven Years’ War, when the principal recipients of British subsidies were Frederick the Great of Prussia and Catherine the Great of Russia. Great they were — but not so great as to decline an English shilling. The subsidies to Frederick began with £200,000 in 1757 and increased a year later to £670,000 per annum, to be employed “in keeping up and augmenting his Forces, which shall act in the most advantageous manner for the common Cause, and for the End proposed by their aforesaid Majesties of reciprocal Defence and mutual Security.”

Britain Paid Dearly for Wars With France

Source: Bank of England

The culmination came in the French Revolutionary and Napoleonic Wars, when His Majesty’s Treasury threw money at just about anyone willing to fight France: Austria, Baden, Brunswick, Hanover, Hesse-Cassel, Hesse-Darmstadt, Morocco, Portugal, Prussia, Russia, Sardinia, Sweden and Sicily — not to mention the Prince of Orange, sundry “German Princes,” “Portuguese Sufferers,” “Russian Sufferers” and “Minor Powers, under engagements with the Duke of Wellington.” The total bill, by the time Napoleon was defeated at Waterloo? Roughly £50,000,000, of which three-fifths was paid in the last four years of the war. In 2022 pounds, adjusted for inflation and growth, that’s around £256 billion ($329 billion).

Yet Britain could only do this with fiscal and monetary policies that substantially increased the national debt — and inflation. Between the outbreak of the French Revolution in 1789 and Waterloo in 1815, the national debt rose from 114% of gross domestic product to 123%, ultimately peaking at 173% in 1822. Consumer prices rose 77% during the war years.

Britain Defeated Napoleon But Not Inflation

Source: Bank of England

It is also worth adding that paying subsidies was not a substitute for having British boots on the ground. It wasn’t Hessians, but Britons (as well as Dutchmen and Hanoverians) the Duke of Wellington commanded at Waterloo.

There are lessons here for the US, a country that long ago lost control of its public finances, to the extent of running deficits above 5% of GDP even when the economy is close to full employment. As a result, the federal debt in public hands is already at 99% of GDP — in what may be the first inning of Cold War II — and projected by the Congressional Budget Office to reach 166% in 30 years’ time.

Last week, Bridgewater Associates LP founder Ray Dalio gave a good interview. “I am  …  concerned about Treasury bonds because of the high debt levels, which high interest rates are adding to,” he said. “I’m also concerned about the softening demand to meet supply, particularly from international buyers worried about the US debt picture and possible sanctions.” Me too, Ray. Not many people were saying this kind of thing about Britain in 1789.

The problems with being a broke paymaster are obvious. 

1. First, you have less money to throw around than you really need. 
2. Second, everyone knows it. The perfect illustration is the complete inability of President Joe Biden’s administration to get the government of Israel to do what it wants, namely stop killing Palestinian civilians caught in the crossfire of its efforts to eliminate Hamas in Gaza.

According to Gideon Rachman and many other commentators, Israel cannot possibly resist American threats to cut off aid if it invades the city of Rafah. “The supply of artillery shells and powerful bombs for offensive operations can no longer be taken for granted,” he wrote last week, “Israel cannot stand alone and [Prime Minister Benjamin] Netanyahu knows it.”

Really? It is true that, since the creation of Israel in 1948, it has been the largest recipient of US foreign aid — to the tune of nearly $300 billion. (The next largest is Egypt, at $160 billion.) However, as a percentage of Israel’s gross national income (GNI), US aid peaked at 22% in 1979. It declined to about 8% of GNI in the early 1980s, and slumped to around 1% in the 2010s. It was not so much that the US fell out of love with Israel: The rapid growth of the Israeli economy drastically reduced the relative importance of American aid.

A Richer Israel Needs Less Military Help

US aid as a percentage of Israeli gross national income has dropped for four decades

Sources: USAID; FRED

True, that assistance is still 16% of the Israeli defense budget. And there are important benefits that come with the sustained nature of US support. Nearly all current American military aid to Israel is based on the 10-year, $38 billion memorandum of understanding (MOU) signed by President Barack Obama in 2016, which covers the years 2019-2028. MOUs are government-to-government grants. They are not legally binding, as treaties are, and do not require Senate ratification. Nevertheless, the US lets Israel negotiate large defense contracts under the assumption that the money will keep on coming, which allows Israel to negotiate better terms than might otherwise be the case.
This is a meaningful benefit — but clearly not meaningful enough to allow Biden to force Netanyahu to halt the war in Gaza. Perhaps it will suffice to head off a second Israeli war against Hezbollah in Lebanon — clearly a much bigger undertaking than the war against Hamas. But even that is far from certain.
The problem of being a poor paymaster is equally evident in the case of Ukraine. For reasons that future historians will struggle to understand, the US suspended its aid to Ukraine in late 2023. Europeans did not fill the gap, with the result that Ukraine’s military capacity was diminished and Russia’s hopes of victory revived. According to the latest Ukraine Support Tracker published by the Kiel Institute for the World Economy, between the beginning of the war and this March, the European Union plus its individual members together allocated a total of €89.9 billion in military, humanitarian and financial aid to Ukraine. The US pledged less, €67 billion.
The result is that Kyiv listens much less to Washington than it did in 2022 and 2023 — hence the recent spate of deep drone strikes aimed at Russia’s energy infrastructure, operations that cannot possibly have been approved by Team Biden, which it seems will (to quote John F. Kennedy) “pay any price, bear any burden, meet any hardship … to assure the survival and success of liberty” — except for higher gasoline prices in an election year.

This has been a horrible failure of American policy. Turning off aid to Ukraine has unquestionably encouraged Putin to believe that victory can be achieved in a relatively short time frame. Thanks to Samuel Charap and Sergey Radchenko, we know now that, when their invasion was going badly in early 2022, the Russians were ready to negotiate a peace deal with Ukraine. The compromise would have ruled out North Atlantic Treaty Organization membership for Kyiv but provided it with multilateral security guarantees to protect its neutrality, and paved the way to EU membership.
After meeting in Istanbul on March 29, a month after the invasion, the two sides announced that they had agreed to a joint communiqué with the title “Key Provisions of the Treaty on Ukraine’s Security Guarantees.” Why it all fell through in May is still a matter for conjecture. Both Russian and Ukrainian sources say that Boris Johnson — the British prime minister and the first Western leader to visit Kyiv in the war — rashly encouraged the Ukrainians to keep fighting for outright victory.
Another theory is that the Ukrainians were too quick to assume that the US would commit itself to fighting Russia if it invaded Ukraine in a future war. One thing is already certain, however: Any chance of a negotiated peace is vanishingly small so long as Putin believes he can win this war because the US has no staying power.

Finally, a question: 

Who gets fat on Diet Cold War? 

The Latin term tertius gaudens is a useful one in this context — the third party who benefits. In Cold War I, there were plenty of these: neutral or non-aligned countries that profited from superpower rivalry (step forward, Switzerland), even as the populations of nations caught up in proxy wars suffered. 

Today, as Gita Gopinath and colleagues at the International Monetary Fund point out, “a set of nonaligned ‘connector’ countries are rapidly gaining importance and serving as a bridge between [the American and Chinese] blocs.”
Suppose they gave a cold war and someone else made all the money? That’s another hard question for American policymakers. Like Diet Coke, Diet Cold War could leave a bitter aftertaste.

Ferguson is also the founder of Greenmantle, an advisory firm; FourWinds Research; Hunting Tower, a venture capital partnership; and the filmmaker Chimerica Media.

More From Niall Ferguson at Bloomberg Opinion:

• The Second Cold War Is Escalating Faster Than the First
• How to Use and Misuse History in Cold War II With China
• If You Think World War III Is Unimaginable, Read This