[updated in May 2023 to include the Nvidia example and refine the argument overall, updated August 2024 to include an assessment by the FRBNY and the quotation from Sashi Tharoor].

Summary

When you are in a weak position, all the choices you have are bad ones. Your opponent who dominates you due to more and/or better resources will ultimately prevail. It may take some time for them to do so, but the fact that it will happen is a certainty. 

To take one example, it has historically been easy to 'blame' the Palestinians and other indigenous groups for their loss of territory. Arguments typically run that if the Palestinians had done 'x' instead of 'y' they would now still be in control over larger portions of land than they currently have.

Looking at another case, you really wonder whether there was ever any universe, for example, where the American Indians were not going to be wiped out by far superior numbers and technologies that their adversaries owned.

But we are fortunate enough to live through a period where erstwhile powerful nations (who have been very ready to blame Palestinians and others for their loss) are being made to suffer the same indignities that others have been through, albeit their loss is not in the domain of geographic territory (yet), rather it's technological and commercial leadership.

This experience should teach everyone that losers don't necessarily lose because they are feckless or stupid; rather, the cards may just be stacked against them.

Alternatively, their adversary may just be in a historical sweet spot.

Introduction

I've always thought that since British Mandate the Palestinians have been in a no-win position. This has been due to their lack of military power and economic and political resources. If they accepted the offers the international community and the Israelis gave them, there would have been an incentive for the Israelis to take more land (if the Pals don't mind yielding some land, they might not mind yielding more), and if the Pals had resisted, that would also have given the Israelis a pretext to take more land (for defensive purposes), the latter has proven to be the case.

In short, whatever the Pals decided did not matter; the Israelis' dominant position ensured that they could respond in a manner that was advantageous to them. The same applies to Native American Indians in the 18th and 19th centuries; whether their response to European settlers was to fight or make treaties, the outcome would always be the same, their lands would be taken. In both cases, there was such an asymmetry between the Europeans and indigenous peoples that there was nothing the colonised could do that would change the outcome.

In the examples that follow, I look at some contemporary examples that illustrate a different dynamic. In these instances, non-Western powers have presented the West with situations where regardless of the actions the West takes, the outcome for the West will not be one that it considers satisfactory.

Huawei - China

The following piece in the Financial Times (FT) neatly summarises how I feel about the situation between the U.S. government and Huawei. In the 21st century, it is beginning to look as if the Chinese have the best cards. For example, Huawei makes good and cost-effective telecoms infrastructure.

Western countries may have security concerns, but if they ban Huawei, they could end up with a poorer solution. Other countries that have no such qualms could benefit from the cost advantages that Huawei equipment offers. But if Western countries accept Huawei, they risk entrenching the advantages that the Chinese have, as well as the claimed security risks.

Sanctions have been a preferred Western method of taking action against countries that have fallen out of favour. But this tool only works where you have something the other person wants and can't get anywhere else; when the situation is reversed - you can end up damaging yourself.

Quote

These actions by the Trump administration have not only pushed us closer to a world split between a “Chinese-based” and “US-based” internet; they may also have dented the ability of America’s tech champions, especially Google, to maintain their dominance. This brash nationalistic trade policy may end up backfiring badly. The game is on.

https://www.ft.com/content/8fc63610-88fe-11e9-b861-54ee436f9768

Nvidia

Jensen Huang of the American chipmaker Nvidia makes a similar claim in May 2023:

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“If [China] can’t buy from . . . the United States, they’ll just build it themselves,” he said. “So the US has to be careful. China is a very important market for the technology industry.”

https://www.ft.com/content/ffbb39a8-2eb5-4239-a70e-2e73b9d15f3e

SWIFT - Russia

This example arose during the Russian invasion of Ukraine in late February 2022. The West wanted to sanction Russia by imposing economic sanctions, including barring Russian entities from access to Western financial systems. But this was not straightforward:

Quote

One reason is that the impact on Russian businesses might not be so serious. The head of a large Russian bank, VTB, said recently he could use other channels for payments, such as phones, messaging apps or email. Russian banks could also route payments via countries that have not imposed sanctions, such as China, which has set up its own payments system to rival Swift. A ban on Russia using Swift could accelerate a the use of China’s rival Cips system. There is also a fear that it could damage to the US dollar’s status as the global reserve currency, and accelerate the use of alternatives such as cryptocurrencies.

https://www.theguardian.com/technology/2022/feb/24/what-is-swift-international-payments-network-russia-sanction

Sic transit gloria mundi (so passes worldly glory)

Some of what we see today has the hallmarks of British attempts to stop Indian technological development by banning the Indians from making their own steam engines, at the start of the 20th century. The British may have delayed Indian development by some decades, but that's all they were able to do. Whether the British took no action to stop Indian technological development or whether they proactively tried to hinder it, ultimately, they would lose. 

Take this from the Indian politician, Shashi Tharoor:

Quote

 

In 1912, therefore, the British passed an act of parliament explicitly making it impossible for Indian workshops to design and manufacture locomotives. Between 1854 and 1947, India imported around 14,400 locomotives from England, and another 3,000 from Canada, the US and Germany, but made none in India after 1912.

 

https://www.theguardian.com/world/2017/mar/08/india-britain-empire-railways-myths-gifts

There are now far too many Indians with increasing levels of capability to stop the juggernaut and Tharoor's article in the Guardian goes on to talk about how Britain in recent years has had to appeal to Indians for railway technology.

The status quo

In mid-2022, following a visit to Taiwan by Senator Pelosi, the FT noted this about the Chinese response to the visit:

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Before the Chinese military launched exercises on an unprecedented scale this week, the G7 had warned Beijing “not to unilaterally change the status quo by force”.

https://www.ft.com/content/5462a57a-bd13-4313-b26b-9645b48a70ee 

In my opinion, it was Pelosi who altered the status quo; this was the most high-ranking visit in 25 years. Based on the theme of this blog post, given the dominant position of the Chinese, the American position should be to maintain the status quo. As soon as they seek to alter it, the Chinese have an excuse to try and establish a new status quo that is more favourable to them.

Federal Reserve Bank of New York

This is what they had to say in a report issued in April 2024, whatver the impact on China, the damage to American businesses as a result of export controls has been significant.

Quote

Amid the current U.S.-China technological race, the U.S. has imposed export controls to deny China access to strategic technologies. We document that these measures prompted a broad-based decoupling of U.S. and Chinese supply chains. Once their Chinese customers are subject to export controls, U.S. suppliers are more likely to terminate relations with Chinese customers, including those not targeted by export controls. However, we find no evidence of reshoring or friend-shoring. As a result of these disruptions, affected suppliers have negative abnormal stock returns, wiping out $130 billion in market capitalization, and experience a drop in bank lending, profitability, and employment.

https://www.newyorkfed.org/research/staff_reports/sr1096

Conclusion

In the context of China, I think the U.S. government feels a threat to its economic/technological dominance. Although this may be dressed up as wanting to preserve fair competition. And U.S. sanctions are its attempt to fight back. But whether the U.S. decides to fight or not, I think in the longer term, that dominance will have to be compromised. Huawei and the Chinese are now too far along the technological path of development, and they are far further ahead than the India of the early 20th century. 

The U.S. is now in a similar technological position versus the Chinese that the Palestinians have been versus the Israelis. In the U.S./China context is issues centre around technology and in the Palestinian/Israeli context it's to do with economics and political power.

Whatever option the US chooses, it will ultimately 'lose'. Loss in this context is not necessarily wholly ceding technological leadership to the Chinese, but it may well involve acknowledging their superiority in certain areas. Other countries like Russia also may be able to work their way around sanctions, for example, so Western attempts to control their behaviour will have limited success.