War between the US and China — an unpleasant thought, for sure…unless you happen to be a defense contractor. The threat of war could be sufficient to power the defense industry’s profit growth for many years.
We would not be tackling this grim topic — nor engaging in the financial market version of grave-dancing — if the suits and uniforms in Washington understood that China is merely implementing its own version of the Monroe Doctrine.
If you don’t remember the Monroe Doctrine from history class, it goes like this: President James Monroe in 1823 put the European powers on notice that if they meddled anywhere in Latin America, the United States would step in to put a stop to it. It was a big “keep out of our backyard” sign.
OK, it was more subtle than that; an aging Thomas Jefferson congratulated Monroe on achieving a “cordial friendship with England.” The doctrine was, indeed, a tacit agreement between the United States and Great Britain. The US took a free ride on the Royal Navy. Its ships patrolled the waters surrounding Latin America, keeping the continental powers far from America’s doorstep.
The original Monroe Doctrine aimed to keep Europeans away. China’s Monroe Doctrine aims to keep the United States from getting closer than it is already.
“The Pacific basin has long been home to the United States’ largest trading partners, and Washington deploys more than 320,000 military personnel in the region, including 60% of its navy,” writes Conn Hallinan of the think tank Foreign Policy in Focus. “The American flag flies over bases in Japan, the Philippines, South Korea, Malaysia, Thailand, the Marshall Islands, Guam and Wake.” The US Seventh Fleet routinely sails near the Chinese coast, to the edge of the “12-mile limit” where international waters end.
No wonder Chinese leaders sense — rightly or wrongly — that they’re being encircled.