Ray Dalio warns U.S. and China are on ‘classic path to war’
Bridgewater Associates founder Ray Dalio is warning the tensions between the U.S. and China regarding the status of Taiwan could be a prelude to a war.
In a posting on his LinkedIn page, the Westport-based hedge fund executive wrote, “Unfortunately, what is happening now between the U.S. and China over Taiwan is following the classic path to war laid out in my book ”˜Principles for Dealing with the Changing World Order,”™” Dalio wrote. “If events continue to follow this path, this conflict will have a much larger global impact than the Russia-Ukraine war because it is between the world’s leading superpowers that are economically much larger and much more intertwined.”
Dalio argued that the conflict between the U.S. and China was “very similar to that which existed between powers immediately prior to World Wars I and II and many other immediate prewar periods.” He also warned the U.S. is being put in a difficult situation over this issue.
“Even though the U.S. fighting to defend Taiwan would seem to be illogical, not fighting a Chinese attack on Taiwan might be perceived as being a big loss of stature and power over other countries that won”™t support the U.S. if it doesn”™t fight and win for its allies,” he continued. “Additionally, such defeats can make leaders look weak to their own people, which can cost them the political support they need to remain in power. And, of course, miscalculations due to misunderstandings when conflicts are transpiring quickly are dangerous. All these dynamics create strong pulls toward wars accelerating even though such mutually destructive wars are so much worse than cooperating and competing in more peaceful ways. There is also risk of untruthful, emotional rhetoric taking hold in both the U.S. and China, creating an atmosphere for escalation.”
While Dalio considered war between the countries to be “improbable,” he warned that officials in both countries are making matters worse.
“A good thing is that sensible people on both sides are scared of war even though they don”™t want to look like they are,” he stated. “A bad thing is that some people on both sides want to intensify the fight because to not do so in the face of the provocation wound be perceived as a sign of weakness. That dynamic of upping the ante to avoid looking like one is backing down has throughout history been shown to be a very dangerous dynamic. We have seen many historic cases which have led to terrible wars because neither side wanted to back down and only few in which sensible people stepped back from the brink when faced with the prospect of unacceptable destruction.”