While the four accelerator technologies (AI, SC, QC, and biotech) will drive the core innovation dynamics of Cold War 2.0, a number of other technologies and industries will play important supporting roles. A few, though, could also produce game-changing innovation. For example, if fusion energy ultimately works, it will profoundly transform global energy markets, and cause massive shifts of wealth out of today’s countries that rely on the export of fossil fuels. Taken together, the businesses designing, developing, and deploying the technologies drive a large segment of wealth creation in both the democracies and the autocracies, thereby producing the economic surplus that can then be used to pay for a nation’s military. With the exception of large-scale nuclear reactors and high-end jet engines, all of these technologies are prone to significant competitive displacement, at least when operating in the relatively open markets of the democracies.
The dual-use dimension of virtually all of these technologies is noteworthy. Shipbuilding is a good example; most of the shipyards that build a country’s merchant fleet also produce the nation’s naval vessels. The industries discussed in this chapter also drive home the important point that although it is easy to think all wealth and innovation creation has gone digital, industrial capacity is still absolutely critical. This is true in the auto industry as it is in the advanced manufacturing of commercial aircraft and especially their jet engines. At the end of the day, physical and virtual technologies and innovation skill sets need to combine seamlessly in the democracies to produce effective economic and military power if they hope to prevail in Cold War 2.0.
Cloud computing is about twenty years old, but it has earlier analogs in “outsourcing” and even “service bureau” type computing resource models from the late 1980s. Today, massive amounts of computer power are accessed from cloud service providers. In a major development, in 2022, the US military entered into large cloud computing relationships with AWS, Microsoft, Google, and Oracle. Moreover, cloud computing companies are very important in the AI supply chain because they have choice datasets upon which AI programs need to be trained, and they have invested billions of dollars in developing AI software. Some of them are also developing high-performance AI-specific SCs, which is not surprising given the volume of computer servers they operate in their data centers. (AWS has about 1.3 million servers.) It is not a coincidence that many of the names below appear on the AI league table at the end of chapter 5.
Here is a list of the world’s principal cloud computing providers, showing their annualized revenue and market share:
Democracies |
Cloud Revenue |
Market Share |
AWS (Amazon) |
$74 billion |
34 percent |
Microsoft Cloud |
$93 |
22 percent |
$23 |
9 percent |
|
Oracle |
$11 |
2 percent |
Kyndryl (IBM) |
$18 |
2 percent |
Autocracies |
Cloud Revenue |
Market Share |
China |
||
Alibaba Cloud |
$12 |
6 percent |
TenCent Cloud |
$4 |
2 percent |
In terms of tech decoupling as an objective and consequence of Cold War 2.0, it is interesting that Alibaba Cloud and TenCent Cloud have the large majority of their data centers in China, with only small footholds in the democracies. Equally, Google Cloud has no data center in China, but has one in Taiwan. The two market leaders, though, AWS and Microsoft, both have a few data centers in China (AWS, 2; Microsoft, 5) and none in Taiwan. In effect, there is already a fairly bifurcated market for cloud computing services as between the United States and China. If the US government brought in a restriction that required US-owned cloud service providers to cease offering AI services to customers in China, presumably such a rule could be observed without too much difficulty for these two market leaders.
Software that performs a function for a human user is as necessary for a computer as the SC that drives the computer. A computer, including its SCs, just sits like a boat anchor until the device comes alive with end user software. AI is a category of software. There are dozens of such categories, but generally most software can be lumped into two big buckets. Horizontal software does a fairly general function, and for many different kinds of users. Word processing software is horizontal, because all sorts of companies, organizations, and individuals make use of it. By contrast, software specifically designed to help a golf club manager operate a golf club is vertical software, as it is solely intended for golf clubs—a user couldn’t, for example, run a company’s financial accounts on it. AI, while a horizontal software, is also an “accelerator,” because elements of AI will invariably be woven into virtually every software program eventually, be it horizontal or vertical software.
When considering a society’s strengths and weaknesses in the context of Cold War 2.0, software is also important as an indicator of how fluent the society is in programming computers. This same thought can be expressed as: What percentage of the population has capacity in software coding? The people in a modern society are expected to have fairly strong literacy skills: they can read, comprehend what they are reading, write in at least the language of their region, and ideally, they have some rudimentary English if their “native” language is not English, given that English is the international language of business, science, and technology. Equally, people are expected to have fairly well-developed numeracy skills—the math skills required to understand the basics of business, science, and technology—though nowadays a high-end calculator can hide a numeracy deficiency, at least to a point. (It could hide it for many entry level jobs but not necessarily for managers.) The modern society, though, now needs its students to learn two more languages, namely software coding and how to read financial statements, or the language of business. Therefore, a country with a strong cohort of software programmers stands a much better chance of succeeding economically and militarily than one deficient in this skill. The comparative strengths of the democracies and the autocracies in software programming will impact the course of Cold War 2.0.
Here are the twenty-five leading software companies in the world by market capitalization (showing how the stock market values them). For Cold War 2.0 analysis purposes, it is important to note that all are based in the United States, unless otherwise noted.
Company |
Market Cap |
|---|---|
Apple |
$2.5 T (trillion) |
Microsoft |
$2.08 T |
Alphabet (Google) |
$1.353 T |
Oracle |
$238 B (billion) |
Salesforce |
$190 B |
Adobe |
$171 B |
SAP—Germany |
$143 B |
Intuit |
$120 B |
IBM |
$112 B |
ADP |
$88 B |
ServiceNow |
$87 B |
Schneider Electric—France |
$86 B |
Palo Alto Networks |
$57 B |
Synopsys |
$57 B |
Cadence Design Systems |
$55 B |
Dassault Systèmes—France |
$53 B |
VMware |
$52 B |
Fortinet |
$49 B |
Workday—Ireland |
$49 B |
Snowflake |
$43 B |
Autodesk |
$43 B |
Atlassian—Australia |
$39 B |
Constellation Software—CAN |
$37 B |
Mobileye—Israel |
$32 B |
Wolters Kluwer—NL |
$31 B |
It is hard not to miss the prominence of the United States on this list of twenty-five. Indeed, of the top 100 public software companies, fully 73 are in the US, and there are no Russian companies in the top 100, and only two from China (Yonyou, at number 53 at $13.3 billion, and Kingsoft at number 86 at $6.4 billion); the rest, all 98, are in democracies: United States, 73; Canada and Israel, 5 each; France, Australia, Japan, China, and United Kingdom, 2 each; Germany, New Zealand, Netherlands, Spain, and Luxembourg, 1 each. With this pedigree of software companies, the top 78 being in North America, it is perhaps no surprise that the top AI companies (AI being a form of software) are also in North America.
Software services represent the large information technology consulting companies that help other companies implement large technology projects, which can range from customizing the base software supplied by the companies noted immediately above, or writing some entirely new software for a function that does not yet have a base software product. These companies (other than IBM) are all fairly young, having grown up in the wake of the computer revolution. The following shows their latest annual sales and market capitalization. The ones under “democracies” are American unless shown otherwise.
Democracies |
Sales |
Market Cap |
Accenture |
$192 billion |
$63 billion |
IBM |
$60 |
$120 |
Deloitte |
$59 |
[private] |
DXC |
$14 |
$5.7 |
Atos (France) |
$12 |
$1.7 |
Capgemini (France) |
$23 |
$32 |
CGI (Canada) |
$10 |
$24 |
Autocracies |
||
There are numerous small computer services consultants headquartered in China, but none of the size and sophistication of the other companies listed in this table. A number of the software service providers listed in this table also provide services to clients in China. |
||
Nonaligned |
||
Infosys (India) |
$18 |
$66 |
Wipro (India) |
$11 |
$25 |
Cognizant (India) |
$19 |
$33 |
TCS (India) |
$27 |
$146 |
Internet platforms are the companies that bring consumers the many and varied range of e-services over the Internet, including messaging, apps of all kinds, video, text, browser-based search, etc. When reviewing the list of companies below, and especially considering their eye-watering market valuations, it must be remembered that not one of them existed before the general advent of the commercial Internet in the 1990s, and they all began as tiny start-ups. In 1994, Amazon was largely Jeff Bezos, his wife MacKenzie, and a few employees packing boxes to fulfill their first Internet orders. Today Amazon is a tech company extraordinaire that happens to sell goods over the Internet. Its cloud computing services arm, AWS, is by far its most profitable division—it is the leader in Table 1 above.
With respect to Cold War 2.0, it is fascinating the degree to which the market for Internet platforms has already bifurcated by technology decoupling between the democracies and the autocracies, given that the autocracies regularly block access from their citizens to many of the Internet platforms that have grown to prominence in the democracies. The only material social media platform that is shared by the United States and China is TikTok, and currently the US Congress is considering whether TikTok presents Americans with a security risk due to their data being accessible by the Chinese government. If congressional sentiment is that there is a material risk, then ByteDance, the parent company of TikTok, will likely be regulated into selling TikTok to non-Chinese owners, and the back-office operations of TikTok will be forced to move out of China. Frankly, this is fairly close to the treatment already meted out to American platforms when they are blocked from reaching consumers in China.
Set out below are the leading Internet platform players in each of the democracies and autocracies, also showing their market capitalization (or if private, their amount of funding):
Service |
Democracies |
Autocracies |
|---|---|---|
e-Commerce |
Amazon $1.3 trillion |
Alibaba $0.232 trillion |
Search |
Google $1.5 |
Baidu $0.050 |
Messaging |
WhatsApp (Meta/Facebook) |
WeChat (TenCent) |
Social |
Meta $0.744 |
TenCent $0.415 |
Video (long) |
YouTube (Google) |
YouKu (Alibaba) |
Video (short) |
TikTok (ByteDance) |
TikTok (ByteDance) |
Rideshare |
Uber $0.086 |
Didi $0.014 |
Accomodation |
Airbnb $0.082 |
Tujia [private $0.755] |
Travel |
Expedia $0.016 |
Tujia [private > $1 billion] |
Hotels |
Booking.com $0.097 |
Haoqiao [private $0.026] |
Payments |
PayPal $0.074 |
Alipay (Alibaba) |
It is worth noting that on the democracy list, all of the companies are based in America, except Booking.com, which hails from the Netherlands.
Telecommunications technologies are critically important for the full functioning of modern life. People love to talk to one another by phone, for a whole host of purposes, and increasingly they can do that cheaply at a distance with the marvels of broadband Internet access and mobile/cellular network connections. Telecom networks also form the backbone of the Internet, the most important communication medium today. The suppliers of the network equipment to the telcos, such as Huawei (China), Ericsson (Sweden), Nokia (Finland), and Cisco (US) have become important players in the technology space. Of these four, which collectively are the leading suppliers in the world by market share and revenue, the rise of the Chinese company Huawei has been nothing short of spectacular.
Prior to the 1960s, telephone systems were essentially mechanical devices. The central telephone exchange was a massive jumble of steel and wires, where calls were connected literally by bringing two wires together to complete a circuit. These units were marvels of mechanical engineering. Then, in a decade, everything mechanical about this environment became digital, software-driven, and SC-enabled. Today, SCs containing sophisticated software are central to the design and operation of the telecom networks that underlay the digital communications revolution that has swept over the world since the advent of the Internet. There is no better testament to this than Huawei’s role in Cold War 2.0 on behalf of China over the last five years.
Huawei has supplied most of the network backbone equipment within China to mobile communications services companies like China Telecom, the world’s largest carrier, with about 390 million subscribers. Huawei’s sales outside of China have been growing as well. In many countries it sells turnkey solutions, going beyond basic network equipment to include sophisticated human surveillance and control systems that especially autocratic regimes can use to closely monitor and track their populations. Huawei also supplies the Chinese military with critical telecom gear for connecting all components of the PLA in both logistics as well as operational settings.
These civilian surveillance oppression and military activities in China and abroad prompted the US government in 2019 to begin a policy of prohibiting Huawei from selling its products and services to US telecom carriers. Australia and New Zealand continued this effort, both banning Huawei in 2018, and then other “Five Eye” partners followed the US’s lead (United Kingdom in 2020, Canada 2022), as well as Japan and Taiwan. One additional concern expressed by these countries—beyond Huawei selling to the PLA and facilitating the oppression of people through digital surveillance—is that Huawei could not ensure that traffic flowing through its systems would not be shared with the Chinese government. It is a central tenet of telecommunications law in the democracies that common carriers (the telecom company) cannot intercept, study, or in any way discern the nature of the content of the traffic that it carries on its network, except pursuant to law enforcement demanding such access authorized by a search warrant approved by an independent judge. It is precisely these rule-of-law protections that don’t exist in the autocracies, including China. Thus, in the democracies there is a legitimate concern that as the supplier of telecom equipment, Huawei could siphon off information flowing through the network and share this highly confidential and commercially sensitive data with the Chinese government and its agencies. Amplifying all these concerns is the fact that Huawei is not a public company, and without its shares being listed on a stock exchange, the public doesn’t get to see the detailed financial, commercial, and other information that public companies have to disclose once every four months.
The American government, though, didn’t stop at merely prohibiting the use of Huawei equipment by US carriers. The Trump administration, in 2019, instituted an embargo on the sale to Huawei by American suppliers of SCs and other components. Later (in 2020), this SC embargo was expanded to include no sale to Huawei of any items, including SCs, that were made using American origin equipment or software. This effectively stopped the flow to Huawei of critical SCs and other types of kit, causing a dramatic loss of sales by Huawei. In 2019 Huawei had sales of $129 billion, and then because of the American trade restrictions this figure fell to $93 billion in 2022. The success of this sanctions policy then emboldened the American administration to extend the same treatment to other Chinese commercial entities, including ZTE, the other leading player in the Chinese telecom equipment space. This SC sanctions experiment with Huawei and ZTE then led a few years later to the Biden administration implementing, in the fall of 2022, the broader sanctions policy on SCs and related equipment.
The world’s leading telecom equipment companies are listed below (with annual sales and market capitalization):
Democracies |
Sales |
Market Cap |
Cisco—US |
$52 billion |
$207 billion |
Nokia—Finland |
$26 |
$23 |
Ericsson—Sweden |
$26 |
$18 |
Autocracies |
Sales |
Market Cap |
Huawei—China |
$93 |
[private] |
ZTE—China |
$18 |
$26 |
Also listed below are the leading smartphone suppliers showing respective market shares:
Company |
Market Share |
|---|---|
Apple |
23 percent |
Samsung |
19 percent |
Xiaomi |
11 percent |
Oppo |
10 percent |
Vivo |
8 percent |
Other |
29 percent |
Company |
Market Share |
|---|---|
Apple |
57 percent |
Samsung |
20 percent |
Lenovo |
6 percent |
6 percent |
|
TCL |
2 percent |
Other |
9 percent |
Company |
Market Share |
|---|---|
Apple |
22 percent |
Oppo |
16 percent |
Vivo |
18 percent |
Honor |
15 percent |
Xiaomi |
12 percent |
Other |
16 percent |
It is interesting to note that with respect to Tables 5(c) and 5(d) above, except for the resilience of the Apple iPhone brand at the high end of the Chinese smartphone market, a virtually complete tech decoupling has occurred between the American and Chinese markets.
Space and satellite technologies have grown in importance and prominence since space programs were first pursued by the Russians and the Americans during the height of Cold War 1 in the late 1950s and early 1960s. Militarily the upper atmosphere of Earth, and above that into space, is of course the ultimate “high ground,” and therefore has special meaning to generals and their planning staff. It is estimated there are over 7,800 working satellites in this part of space, and thousands more are planned. The miniaturization of electrical and other components facilitated by the SC revolution has allowed satellites to reduce greatly in size, and their numbers to grow exponentially. The other big news in the last decade is that the rocket delivery systems have been completely redesigned to be much smaller, cheaper, and in some cases reusable. The result has been that in the democracies several private companies have entered the field of designing, building, and operating these smaller rockets, which has caused the cost of putting a satellite into orbit around the earth to plummet—the cost has fallen from $65,000 per kilogram of launch weight to $1,500 per kilogram. The leader here is SpaceX, which has been Elon Musk’s ultimate corporate vehicle for shaking up the launch sector with a form of competitive displacement on steroids.
On the satellite front, the dramatically new economics of sending smaller satellites into low earth orbit has opened a veritable floodgate of innovation in technology advancement around new ways of sensing the world, and in the business models bringing these new services to civilian and military markets. The following shows only builders of satellites and launch vehicles (“rockets”), and not the operators of various other satellite systems. Again, Elon Musk has broken prior taboos and economic models with his Starlink business, which currently has about 4,000 small satellites in orbit, but plans for ten times that many. There are several others, though, also bringing entirely new innovations and business models to the civilian and government/intelligence/military markets, including Capella, which uses novel synthetic aperture radio wave/radar sensing technology so images can be taken at night and in cloudy weather—not just during sunny days—and then Capella conducts real-time analysis of objects and trends using novel AI systems.
In many respects the contrast between the hyperactivity in the democracies in commercial space activity and the lackluster, top-down government-heavy Chinese approach couldn’t be more stark. What new companies there are in China for this burgeoning market are generally offshoots from the two large state-owned legacy space contractors (CASIC—China Aerospace Science and Industry Corporation, and CASC—China Aerospace Science and Technology Corporation). Then, the spun-off company often has state-controlled investors, presumably to keep a close eye on developments; for example, a large investor in ispace, the leader in China in commercial launch, is the Shanghai Pudong Science and Technology Investment Co., which is wholly owned by the Chinese government. Moreover, the rockets being used by ispace are variations on the Chinese military’s missiles, sourced from CASIC and CASC.
On the satellite front, instead of relying on the private sector to create a Starlink-type competitor, the Chinese government created yet another state-owned company, China Satellite Networks Limited (CSCN) to bring a system of low earth satellite constellations to fruition. In two years CSCN, working with two legacy state-owned behemoths (China Electronics and Technology Group Corporation, CETC, and China Electronics Corporation, CEC) has made very little progress. As a result, the central government in Beijing sent its corruption investigators into the offices of CSCN to determine if there has been wrongdoing, which is a typical response from Beijing when the top-down, government-heavy system of technology innovation fails. Bottom line, the Chinese autocrats, both for launch vehicles and satellites, simply will not allow competitive displacement to work its magic and their technology innovation is stunted as a result.
Set out below are the major players in the launch and satellite domains, showing either their market capitalization (if they are public companies), or how much funding they have raised (if they are still private companies):
Democracies |
Funding or Market Cap if Public |
SpaceX—US |
$9.8 billion |
Starlink—US |
$0.041 |
Rocket Lab—US (public) |
$2.74 |
Blue Origin—US |
$0.167 |
Lockheed Martin—US (public) |
$0.116 |
Boeing—US (public) |
$0.127 |
Amazon—US (public) |
$1.331 trillion |
Viasat—US (public) |
$5.2 billion |
Planet Labs—US (public) |
$0.573 |
Slingshot Aerospace—US |
$0.118 |
York Space Systems—US |
$0.009 |
BlackSky—US (public) |
$0.292 |
Iridium—US (public) |
$7.59 |
Globalstar—US (public) |
$1.88 |
Axiom Space—US |
$0.432 |
Orbex—US |
$0.109 |
Omnispace—US |
$0.140 |
Northrup Grumman—US (public) |
$68.7 |
Capella Space—US |
$0.239 |
Relativity—US |
$1.3 |
EchoStar—US (public) |
$1.55 |
Pixxel—US |
$0.069 |
Maxar/SSL—CAN/US |
$4.00 |
Kepler—CAN |
$0.177 |
Intelsat |
$0.054 |
Arianespace—FR/EU |
$0.111 |
Eutelsat/OneWeb—FR/UK (public) |
$1.62 |
Airbus—EU (public) |
$113 |
Thales/Leonardo—FR/IT (public) |
$31 |
Ovzon—SWE |
$0.065 |
Virgin Galactic/Orbit—UK (public) |
$1.05 |
Astroscale—JPN |
$0.338 |
Mitsubishi Heavy Ind.—JPN (public) |
$15.4 |
Autocracies |
Funding or Market Cap if Public |
China |
|
ispace |
$0.276 |
Galactic Energy |
$0.193 |
ExPace |
$0.514 |
One Space |
$0.116 |
Deep Blue Aerospace |
$0.027 |
Space Transportation |
$0.060 |
It is telling that Russian companies don’t appear on the above list. Even with respect to the “big science” space missions, Russia’s activity level has fallen off. Starting in the 1990s, Russia and the United States together built and operated the International Space Station (ISS). In a seemingly preemptive move following Russia’s invasion of Ukraine, the Russian space agency, Roscosmos, indicated in June 2022 that it will be withdrawing from the ISS after 2024. The ISS was born out of discussions between Soviet Russian leader Mikhail Gorbachev and US president Ronald Reagan in 1985, when relations between the United States and Russia began to thaw as Gorbachev pressed his perestroika and glasnost initiatives forward. With the new Cold War 2.0 heating up, and Russia announcing it will pull out of the ISS, the Russians seem to have decided to build their own space station. The Chinese have indicated they will do the same and build their own. (The Chinese were never invited by the Americans to participate in the ISS.) It seems that Cold War 2.0 will not see much great power cooperation in space (not even between the Russians and the Chinese). Indeed, the head of Roscosmos, a number of months after the start of the Russo-Ukrainian War, reminded the Americans that given that Russia was the first to land a probe on Venus, that planet belonged to Russia. This sort of sentiment, even if expressed more in jest, does not augur well for the international cooperation that will be required from the three large space powers, and the many others vying for discovery of the planets, if peace is to continue in the vastness beyond the upper atmosphere.
Nuclear industries are the purveyors of classic dual-use technology. It is also a very schizophrenic industry, in the sense that it can bring great benefit one minute in the form of a nuclear energy (greenhouse gas–free) electricity-generating power plant, but then the next minute that nuclear power plant can turn incredibly dangerous if there is a major accident and the material used to power the reactor melts down and releases nuclear particles into the atmosphere, putting human and other life at risk. Operating nuclear power plants, including on submarines with small nuclear-powered engines, requires a significant degree of scientific and technological expertise, which tends to be in short supply nowadays. In the AUKUS nuclear-powered submarine deal, the development of nuclear science engineers by Australia will be key.
SCs and software proliferate in nuclear-based products and techniques. The equipment used to manufacture the precision components of a nuclear power plant or a nuclear-powered submarine (whether it carries nuclear weapons or not) is now indelibly controlled by microcircuits. Advanced manufacturing is simply another phrase for “lots of computers controlling how we make things,” and the nuclear industry supply chain relies very heavily on precision engineering and advanced manufacturing. As for the nuclear power plant itself, it used to be the domain of the civil and mechanical engineer, and of course those disciplines are still vital. The technology now that permeates the plant’s control system, its brain and nerve system, as it were, is all imbued with software and SCs. Nuclear physics still drives the formulae for coaxing power from the atom, but the processes that make that a viable and safe procedure are all overseen and controlled by microelectronics running on software and SCs.
From the perspective of Cold War 2.0, one of the challenges to the democracies is Rosatom, the company in Russia that is owned and controlled by the state. (Putin himself can give it direction under its by-laws.) Rosatom has a very large business designing, building, and operating nuclear power plants, and then supplying customers with fuel supplies and maintenance services. It is very active internationally, currently building nuclear plants in eleven countries.1 It also has a sizable global business in enriching uranium for use as fuel for nuclear reactors. Currently about 40 percent of the fuel used by US nuclear plants is supplied by Rosatom, and this Russian company is also the third-largest supplier of nuclear fuel to Europe. Since Russia’s invasion of Ukraine, there has been a great deal of attention on eliminating the dependence of the democracies on Russian oil and gas, but not nearly enough focus on removing Rosatom from the supply chain for nuclear products and services purchased by customers in the democracies. The democracies must decouple themselves from Russia with respect to nuclear technology and supplies—this is an important priority objective for the democracies in Cold War 2.0.
Ukraine is in a particularly vulnerable posture, as it has fifteen nuclear reactors based on Russian design and technology, a hangover legacy of the Soviet Russian era. Nevertheless, starting right after the Russian annexation of Crimea in 2014, Ukraine began to switch its source for nuclear fuel to Westinghouse, an American company (but owned by Canadian entities). With the full-scale Russian invasion of Ukraine in February 2022, more democracies are heading in this direction (including Czechia, Slovakia, and Bulgaria), but much more could be done on this front. The democracies need to band together and create some large-volume commitments for nuclear fuel supply so that suppliers there can substitute for services and products currently provided to them by Rosatom. A similar strategy was executed by the European Union in March 2023 when it placed a large order for ammunition using a €1 billion financing facility, which member states then paid back as they took actual delivery of ammunition. Acting together, nuclear-power democracies like Canada, France, the Netherlands, and the US have enough capacity to displace Rosatom completely in their nuclear fuel supply chains, but they need to implement collective solutions to do so cost-effectively and with some dispatch. There are some legacy programs that contributed to the current state of affairs, such as the “Megatons to Megawatts” deal in the 1990s, where the US agreed to buy fuel from Russia that was derived from Russian military nuclear warheads that were dismantled after the collapse of the Soviet Union. But new exigencies face the democracies, and these historic practices cannot interfere with the new tech decoupling of the democracies from the autocracies required in response to the Russo-Ukrainian War.
Within NATO itself, Hungary and Bulgaria pose a particular risk as they obtain 37 percent and 43 percent, respectively, of their electricity from Rosatom-built nuclear plants. As is often the case nowadays, Turkey has been unhelpful within the NATO system by signing a huge contract with Rosatom for the design, construction, and operation of a large nuclear power facility, where the nuclear power generation facilities themselves will remain owned by Rosatom during the course of the multidecade contract. The concern is that the Russian government could hold these three countries hostage given their dependence on a Russian company owned and directed by the Kremlin. Russia has a track record of using its energy exports to promote its geopolitical agenda with other countries in similar circumstances, as when it cut off Ukraine from supplies of gas, or when it told the Germans there were maintenance issues with Nord Stream 1 pipeline. The deep commercial relationships required by nuclear power deals also offer opportunities for sabotage, influence peddling, corruption, and espionage, or merely hard-nosed diplomacy. About half the countries that abstained from voting in favor of UN General Assembly resolutions condemning Russia’s invasion of Ukraine had material nuclear power arrangements with Rosatom. Sensible Finland has shown the way by canceling a nuclear plant project with Rosatom soon after Russia’s invasion of Ukraine. In a similar vein, Poland and Ukraine have selected Westinghouse to build their new nuclear reactors. All three of these actions are good examples of the tech decoupling required by the new Cold War 2.0.
At the same time, it should also be mentioned that Russia’s international nuclear power diplomacy can backfire with ugly consequences. In the mid-2010s, Putin tried to force South Africa into a long-term commercial relationship whereby Russia would build eight nuclear reactors for that country at an estimated cost (once all maintenance and fuel services are included) of $76 billion. The procurement was done without South Africa going through the usual competitive bid processes, and SA civil society erupted once details of the deal became public. South Africa’s legal system was invoked, and quashed the transaction. SA’s president, Jacob Zuma, and the Gupta clan, were severely castigated, but Putin also lost tremendous face, particularly in Africa, for failing to assist SA in following accepted best practices for these types of transactions. Ultimately SA’s democratic institutions (including its adherence to checks and balances) saved the day.
The key players in the global nuclear industry are listed below, associated with their “home country,” with a rough number of the large-scale nuclear reactors in operation in that country (which gives a general sense of the expertise of the industry players):
Democracies |
No. of reactors |
United States (Westinghouse—Canadian ownership; GE Hitachi) |
93 |
France (Framatome) |
56 |
South Korea (GEH; KAERI) |
25 |
Canada (SNC-Lavalin) |
19 |
Japan (GEH) and Germany (GEH/Rosatom) are decommissioning their reactors |
|
Autocracies |
No. of reactors |
Russia (Rosatom) (excluding foreign sites) |
37 |
China (China National Nuclear Corporation, and China General Nuclear Power Group) |
54 |
Nonaligned |
No. of reactors |
India (Bhaba) (also Rosatom building 6 reactors) |
23 |
An interesting development in the nuclear power space is the number of new entrants that are promoting their fission technology for small-sized reactors, producing up to 300 GW of electricity per year, instead of 1,000 to 3,000 GW for the large, legacy nuclear technology systems. It’s too early to tell if these new players will pose a challenge of competitive displacement to the legacy companies/technologies. Here are some of the larger new players, including showing the amount of funds raised by each of them:
Democracies |
Funding |
TerraPower—US |
$83 million |
NuScale Power—US |
$469 |
BWX—US |
$650 [public] |
Moltex—UK/Canada |
$50 |
There are also several of the legacy suppliers proposing/building solutions for the “small” reactor market:
Democracies |
Funding |
Westinghouse (eVinci)—US |
N/A |
GE/Hitachi—US/Japan |
N/A |
Rolls-Royce SMR—UK |
N/A |
Autocracies |
Funding |
CNNC—China |
N/A |
It will be very interesting to observe how the smaller new entrants in the compact reactor domain fare against the downsized reactor offerings of the bigger companies, and whether competitive displacement will work its magic when the nimble new entrants go up against the established thinking of the industry veterans.
Fusion technology is being pursued by a number of companies and governments around the world, given the massive potential of atomic fusion to satisfy the world’s energy needs in a manner that has fewer downsides to the environment. Fusion is the process of compressing atoms together, which gives off gargantuan amounts of energy. Fusion is the process that powers the sun, as well as thermonuclear bombs. (“Regular” atomic bombs are driven by fission, where an atom is split, rather than fused with another atom.) The current research program for fusion is proceeding by two general avenues. First, there is a group of nations participating in building the International Thermonuclear Experimental Reactor (ITER), which, when completed, will be a massive Tokamak reactor to conduct fusion experiments. The participants in ITER are the European Union, the United States, Russia, China, India, Japan, and South Korea. The total cost of the project is estimated at about $60 billion, with most funding being satisfied by in-kind contributions of the various sections of the reactor, which is being built in the south of France.
The audacious construction technique employed in creating the ITER facility simply couldn’t be contemplated without modern computer-based (that is, software and SC-driven) design, procurement, and construction management techniques. The bulk of each country’s contribution is actually not money, but the manufacturing of specific sections of the huge Tokamak reactor. Therefore, its design is first created using a “digital twin” technique, where each component, down to the screws, are replicated electronically in digital wire frame and then fuller renderings. This electronic blueprint is then used by each country to precision-engineer and advance manufacture the pieces of this huge jigsaw puzzle (again, with reams of high-performance SC-driven machines). These pieces are then delivered to the construction site in Cadarache, France, where a multinational engineering team does final quality control, and supervises the construction team in putting the pieces together. It is the largest science experiment ever attempted by humankind. It simply couldn’t be contemplated without software running high-performance SCs, humming continually in the background.
In terms of Cold War 2.0, after Russia’s invasion of Ukraine in February 2022, there was discussion within the democracies about expelling Russia from the ITER consortium, but this would have proven impractical as Russia had already completed fabrication of several of its major contributions and was working on others which, if not forthcoming, would be difficult for other partners to backfill. Interestingly, though, if the ITER experiment proves to be a success, the EU has already indicated it will carry forward the fusion work through another research consortium that is limited to EU members, presumably in order to better ensure which non-EU entities will be invited to participate. This is more in keeping with other international research consortia that expelled Russia from their organizations after the start of the Russo-Ukrainian War. For example, CERN, the international physics research consortium based in Geneva, indicated in March 2022 that it would not renew its research collaboration agreement with Russia when it expires at the end of 2024, yet further evidence of tech decoupling flowing from Cold War 2.0.
The second avenue along which fusion research is proceeding is a profusion of private companies building smaller demonstration plants, the last step before they build commercial plants capable of producing electricity from fusion processes that would be sold to their respective countries’ electricity grids. There are about forty companies in the world with interesting fusion technologies, but here are the six who have each raised over $100 million, and therefore they are the serious players (showing national base, and amount raised to date).2 What’s key about these private companies is that they are funded by venture capital firms and individual venture investors from Silicon Valley, who then bring American early-stage high-tech company disciplines to these moonshots.3
Democracies |
Funding |
Commonwealth Fusion Systems—US |
$2 B |
TAE Technologies—US |
$1 B |
Helion Energy—US |
$.577 |
General Fusion—Canada |
$.300 |
Tokamak—UK |
$.250 |
Zap Energy—US |
$.200 |
First Light Fusion—UK |
$.100 |
Autocracies |
Funding |
ENN Fusion Technology—China |
$200 M |
What’s very telling from this list is that there are seven companies on it from democracies, and only one from the autocracies. This is one of the (not so) secret sauces of the democracies when it comes to their success in technology innovation. They make many more bets, with greater volumes of financial resources, than the autocracies, and so it stands to reason that the democracies will simply produce more scientific and engineering breakthroughs than the autocracies. This then drives a greater rate of competitive displacement in the democracies, and superior economic growth, and finally a greater surplus of wealth that can be allocated to various social objectives, including national security, as required. As noted previously, this phenomenon is a major reason why the democracies will prevail over the autocracies in Cold War 2.0. Moreover, in China and Russia, the entrenched position of the legacy fission nuclear industry will pose a supreme obstacle to the eventual introduction of companies built upon nuclear fusion technologies, because all the major players in the fission domain are state entities in which the current political leadership has huge vested interests.
Automobile manufacturers today constitute the largest high-tech industry in the world, whether considered by sales, number of employees, or the vast supply chains they have. Between the time of its invention (in the 1880s) to around the 2010s, cars and trucks were purely mechanical devices. Today, there are about 1,500 SCs in each automobile, and this number is rising quickly. When vehicles achieve full autonomy (i.e., driving without a human driver), the number of SCs will double. From a Cold War 2.0 perspective, while civilian automakers don’t make military vehicles in peacetime, in World War II it was the vast auto factories of Detroit that ultimately swung the war in favor of the allies, as auto plants were transformed into factories pumping out tanks, trucks, jeeps, ships, and aircraft.
Here are the top automakers in the world, and their annual sales:
Company |
Annual Sales |
Democracies |
|
Volkswagen—Germany |
$296 billion |
Toyota—Japan |
$279 |
Stellantis—US/Italy (Chrysler, Fiat) |
$176 |
Mercedes-Benz—Germany |
$158 |
Ford—US |
$136 |
BMW—Germany |
$131 |
Honda—Japan |
$129 |
General Motors—US |
$127 |
Hyundai—South Korea |
$102 |
Nissan—Japan |
$75 |
KIA—South Korea |
$61 |
Renault—France |
$54 |
Tesla—US |
$54 |
Suzuki—Japan |
$32 |
Autocracies |
|
China |
|
SAIC—China |
$121 |
FAW—China |
$109 |
Dongfeng—China |
$86 |
BAIC—China |
$75 |
GAC—China |
$66 |
Geely—China (owns Volvo) |
$56 |
With respect to China it should be noted that a new generation of makers of electric vehicles has recently sprung up, including Li Auto, BYD, and Nio Xpeng Motors. It is too early to tell which (if any) of these will do well in the Chinese, let alone other, markets.
Shipbuilders at first glance may not seem all that high-tech or strategic, but in fact their operations, and the precision manufacturing and the use of robotics in their shipyards, and the array of high-tech gear that today operates a merchant vessel (and of course dominates the weapons systems on naval vessels), easily qualify them for listing here. Moreover, the importance of the world’s shipping industry cannot be ignored. Notwithstanding the critical role of digital high tech in the world today, physical goods still matter hugely, such as natural resources, agricultural products, foodstuffs, and all the things that may be purchased at Walmart and IKEA—and 70 percent of all these sorts of goods traded between countries is carried by ship (only perishable cargos, for the most part, are delivered by aircraft). Therefore, for Cold War 2.0 purposes, it matters who the world’s leading shipbuilders are, how tech-savvy they have become, and in which countries they have their shipyards.
Here is a list of key shipbuilders, grouped by country and their respective market share of the global shipbuilding market:
Democracies |
Japan: 29 percent |
Sumitomo Heavy Industries |
Imabari |
Mitsubishi Heavy Industries |
South Korea: 17 percent |
Hyundai Heavy Industries |
K Shipbuilding |
Samsung Heavy Industries |
Daewoo |
Other: 3 percent |
Damen—The Netherlands |
Fincantieri—Italy |
Huntington Ingalls—US |
Autocracies: 46 percent |
China State Shipbuilding Corporation—China |
Essentially, large merchant ships and most naval vessels get built in three countries in Asia, namely two democracies (Japan and South Korea) and one autocracy (China). For instance, South Korea builds 90 percent of the world’s ships for transporting liquefied natural gas. These vessels became absolutely critical when Russia commenced its invasion of Ukraine, and Europe had to be weaned off Russian natural gas thanks largely to significant shipments to Europe of American natural gas by new LNG tankers. And while high-end SC production, centered in Taiwan, can be replicated in the US by TSMC and Intel in their new plants in America, reproducing a huge shipbuilding capability, with the attendant dry docks and very specialized supply chains, would prove to be of an order of magnitude more difficult. This is another important reason for the democracies, as a Cold War 2.0 imperative, to create a PATO collective security organization in East Asia.
Commercial aircraft are among the most complex machines built today. As is the case with many of the other industries discussed in this chapter, airplanes were once exclusively mechanical devices. Today, however, high tech permeates virtually every process from takeoff to landing and everything in between. Each of the larger commercial aircraft, and the military planes of any size, contain software programs that comprise millions of lines of computer code, all stored and manipulated on SCs. As the amount of digital increases, the quality of the software code becomes key, as Boeing found out when software design problems with the 737 MAX caused it billions of dollars of damage—and the deaths of 346 people when two of these planes crashed when the onboard computerized flight system malfunctioned. Boeing also learned that precision engineering and advanced manufacturing is a critical stage of building aircraft, when some structural/joint problems with its 787 Dreamliner caused another large problem for the company recently, delaying the delivery of hundreds of planes.
In terms of Cold War 2.0, the civilian aircraft industry is largely a global duopoly dominated by the democracies. Boeing, the American company, had the industry virtually to itself for several decades after World War II. Then in 1970 the European Union decided it needed a homegrown champion, and a fascinating consortium of expertise and funding from businesses in Britain, France, Germany, and Spain got together to produce Airbus, which today sells more airplanes per year than Boeing. Not surprisingly the Chinese, tired of buying huge fleets of planes from Boeing and Airbus, have merged various domestic businesses together to form COMAC, which is desperately trying to break into the market with both a short-haul middle-aisle plane and a larger two-aisle plane for longer international routes. At the same time, though, in April 2023, when French president Macron was in Beijing trying to get Chinese paramount leader Xi Jinping to engage in a peace process for the Russo-Ukrainian War, he found some time to sign an important contract between France and China that would give China even more scope to manufacture and assemble key components of the Airbus planes to be sold to Chinese airlines.
From a Cold War 2.0 perspective, large aircraft are of course exemplary dual-use devices. It is no surprise that Boeing, Airbus, and COMAC make military planes as well. Shown below are their sales and market cap:
Democracies |
Sales |
Market Cap |
Boeing—US |
$66 billion |
$128 billion |
Lockheed Martin—US |
$66 |
$116 |
Airbus—Europe |
$61 |
$113 |
Northrup Grumman—US |
$37 |
$68 |
Leonardo—Italy |
$15 |
$6.8 |
Textron—US |
$12 |
$13 |
Dassault—France |
$7.4 |
$15 |
Bombardier—Canada |
$6.9 |
$4.3 |
Korea Aerospace—SK |
$2.0 |
$4.0 |
Autocracies |
Sales |
Market Cap |
Commercial Aircraft Corporation of China (COMOC)—China |
[state—secret] |
state owned |
Aviation Industry Corporation of China (AVIC)—China |
$20 |
state owned |
United Aircraft Corporation—Russia |
$7.2 |
$21 |
Nonaligned |
Sales |
Market Cap |
Hindustan Aeronautics—India |
$3.3 |
$15.4 |
Embraer—Brazil |
$4.5 |
$2.7 |
There are about a dozen major systems that go into a modern jet aircraft, and no single company can make them all. For example, when China’s COMAC launched the C919 single-aisle commercial airliner a few years ago, Beijing hailed the event as a breakthrough for China, that they finally had a “made in China” aircraft that they could use in place of the Boeing and Airbus planes they had been buying for decades. Well, from a Cold War 2.0 perspective, while the final assembly of the C919 is indeed done in China, the following critical subsystems come from companies based in the democracies: hydraulics, landing gear, avionics, flight controls, and, most important, the engines. This speaks to the issue about potential sanctions to be levied on China if it were to attack Taiwan in order to force the island nation to become a part of China. Were such sanctions implemented by the democracies, the C919 production line would cease to operate, and fairly soon the existing C919s operated by Chinese airlines would be grounded for want of spare parts and software upgrades. A central question of the 21st century will be whether this sort of economic consideration will hold sway over Xi Jinping, or whether geopolitics will trump economics for the Chinese supreme autocrat.
Jet engines, as noted above, are critical for commercial airliners and military aircraft, but interestingly they are not made by the aircraft manufacturers. Rather, they are an industry unto themselves, largely because they are extremely complex and expensive to design, develop, and manufacture. As with the aircraft makers, the leaders in the market are all in the democracies, but the Russians and the Chinese are working hard to catch up, though from a Cold War 2.0 perspective there is a real weakness in this domain in the autocracies. Russia was going to use engines from the democracies (GE and RR) on the new long-haul commercial aircraft that Russia and China were building as a joint venture (the CR929), but then the sanctions levied in response to the Russian invasion of Ukraine in 2022 threw a wrench into that plan. The autocracies now have to develop a new engine, using no components from the democracies. This will be very difficult—perhaps not as hard as developing sub 14 nm SCs, but almost. And see chapter 10 for a discussion of how the CR929 ultimately fell apart because the Russians did not want to share their jet engine know-how with the Chinese for fear of having it stolen by them, as there was plenty of prior evidence where Chinese “partners” reverse engineered Russian engine technology to avoid having to pay royalties on additional Russian components.
China has a further challenge with making high-end jet engines that is similar to its ambition to make high-performance SCs. State-of-the-art machine tools are needed to produce the finely engineered parts for aircraft. China doesn’t have the capability to manufacture these very sophisticated machine tools, and so has to import them from the democracies, largely made by German, Japanese, Italian, and South Korean firms. This is very similar to the conundrum China has with self-sufficient production of 5 nm and 3 nm SCs—China simply doesn’t have the etching machine from the Netherlands which is a must to be able to make SCs at this very advanced level. These are deficiencies that the Chinese will be hard-pressed to rectify as Cold War 2.0 unfolds over the coming years.
Here are the current sales and market capitalization figures for the aircraft engine manufacturers:
Democracies |
Sales |
Market Cap |
General Electric—US |
$69 billion |
$120 billion |
Pratt & Whitney (Raytheon)—US |
$68 |
$142 |
Safran—France (and CFM JV with GE) |
$17 |
$66 |
Rolls-Royce—UK |
$16 |
$16 |
Autocracies |
Sales |
Market Cap |
United Aircraft Corporation—Russia |
$7.2 |
$21 |
Aero Engine Corporation of China (still in development mode) |
N/A |
N/A |
China is investing heavily to develop its own national jet engine capable of powering a commercial airliner (the CJ-1000A and CJ2000 engines). It is also working hard on perfecting jet engines for its air force jet fighters (the WS-15 and WS-20 models of engines). But high-performance jet engines are fiendishly difficult to innovate and engineer. Its not just propulsion engineering that needs to be mastered, but also a myriad of other domains of expertise, such as metallurgy with titanium and dozens of other alloys. Russia has provided China with about 4,000 jet engines for military purposes (airplanes and helicopters) over the past twenty years. For Cold War 2.0 purposes, it is likely that China will need another ten to fifteen years to build its national civilian and military jet engine–making capability to be able to cease relying on the Russians. In the meantime, the sanctions of the democracies on Russia make the continued flow of Russian engines somewhat problematic. For the foreseeable future, jet engines pose a real Achilles heel to the headlong expansion of the Chinese PLA air force.
The Chinese are not helping themselves by ignoring, and indeed consciously opposing, the principle of competitive displacement as they pursue the development of a world-class jet engine. They have concentrated all their efforts into one company, Aero Engine Corporation of China, to make their civilian jet (the CJ series), and one company (Shenyang Aeroengine Research Institute, an AVIC subsidiary) to make the military jet (the WS series). In effect, neither company has competition—and without competition there is no competitive displacement. Contrast this with the democracies, where there are four meaningful competitors, and competition is enhanced by allowing customers of commercial airliners, for example, to buy a jet family equipped with one of two engine options, so that the jet engine manufacturers are kept on their toes. Interestingly, in 1999 AVIC’s jet engine business was split in two, but in 2008 they were remerged together again—apparently the degree of competition did not sit well with the companies; a poor decision if the goal is to produce a state-of-the-art jet engine.
Robotics is the last civilian industrial domain highlighted in this chapter because the building of most of the other sophisticated products/goods noted above require a great deal of precision engineering and advanced manufacturing, both of which typically manifest themselves through high-tech industrial robots. Indeed, industrial robots (as opposed to “social” or “delivery” robots, which are not dealt with here) are central to most manufacturing concerns today, including factories ranging from autos, biomedical devices, consumer electronic devices, food processing, and in logistics warehouses—there are about 3.5 million industrial robots installed in factories worldwide. And of course, at the risk of beating a dead horse, it goes without saying that the guts of these robotic devices are the software and SCs in them that control their physical appendages and core functionalities, and their software is increasingly of the AI variety.
Here are the top dozen industrial robotics companies in the world, the number of units shipped, and their annual sales and market capitalization:
Democracies |
Sales |
Market Cap |
Units Shipped |
FANUC—JPN |
$6.5 billion |
$32 billion |
750,000 |
ABB—SWE/SWI |
$30.3 |
$69 |
500,000 |
Yaskawa—JPN |
$3.7 |
$11 |
500,000 |
Epson—JPN |
$1.3 |
$6 (Seiko) |
150,000 |
Kawasaki—JPN |
$1.2 |
$35 |
210,000 |
Denso—JPN |
$46 |
$49 |
120,000 |
Kuka—GER |
$3.9 |
$3.4 |
100,000 |
Mitsubishi Electric—JPN |
$36 |
$30 |
70,000 |
Universal—DK/US |
$0.3 |
$16 (Teradyne) |
50,000 |
Omron—JPN |
$6.3 |
$12 |
20,000 |
Autocracies |
Sales |
Market Cap |
Units Shipped |
Siasun—China |
$.5 |
$3.1 |
[private] |
China has the largest number of installed industrial robots (about 270,000), as you might expect from the “workshop of the world.” The subsequent six countries, and their numbers, are Japan, 47,000; United States, 35,000; South Korea, 31,000; Germany, 23,000; Italy, 14,000; and Taiwan, 9,600. At the same time, though, China’s indigenous industrial robot makers are struggling, even though they receive significant support from the Chinese government. They tend to compete on price (coming in about 30 percent cheaper than the Japanese or German suppliers), but most Chinese factory managers seem to agree with the old truism “You get what you pay for.” Still, the CCP is trying hard to win market share from the foreigners, and the Ministry of Industry and Information Technology, along with fourteen other central departments, has a five-year plan for the robotics industry in China. And there are certainly some interesting smaller players with novel technologies, like Dobot and Mech-Mind, but they are mainly in the nonindustrial subdomains of the sector. All of the Chinese manufacturers, though, tend to rely heavily on critical parts made in the democracies, and so from a Cold War 2.0 perspective, a mass trade embargo by the democracies over a China invasion of Taiwan would effectively bring the Chinese industry to a halt.
Military defense contractors obviously must also be discussed under “Other Important Technologies” because no conversation about national military power would be complete without giving them a prominent place in the analysis. In many respects the defense industry combines all the elements of the discussion noted previously, in order to produce state-of-the-art weapons systems in a cost-effective manner—no easy task. The products of these “original equipment manufacturers” can be put into the following buckets: munitions (warheads, the explosive part of bombs, etc.); delivery vehicles that transport the munitions to their intended target (planes, tanks, ships, and the missiles launched from the planes, tanks, and ships); communications, command, and control systems (some now add a fourth “C,” for computers, so C4); systems that collect intelligence, surveillance, and reconnaissance (ISR) and other data necessary for undertaking C4.
Increasingly, these military contractors also serve as very important “system integrators,” where they take the individual components produced by smaller entities, often even start-ups in the tech space, and then ensure that these pieces are modified properly to fit within the overall weapons system, are properly interfaced with other related systems and components, and then they take responsibility for ensuring the ongoing maintenance and sustaining of the overall system.
Military defense is a very large business. Countries spent $2.24 trillion on defense purchases in 2022. Here are the top fifteen players, each with sales of over $10 billion, ranked by size of sales, and then the next 70 players aggregated by country:4
Company |
Annual Sales |
Lockheed Martin—US |
$60.340 B |
RTX (Raytheon)—US |
$41.850 |
Boeing—US |
$33.420 |
Northrup Grumman—US |
$29.880 |
General Dynamics—US |
$26.390 |
BAE—UK |
$26.020 |
NORINCO—China |
$21.570 |
AVIC—China |
$20.110 |
CASC—China |
$19.100 |
CETC—China |
$14.990 |
CASIC—China |
$14.520 |
Leonardo—Italy |
$13.870 |
L3Harris Technologies—US |
$13.360 |
CSSC—China |
$11.130 |
Airbus—France |
$10.850 |
Sales totals for top 15 |
|
Democracies |
$294.160 |
Autocracies |
$101.420 |
The next 15 are based in: |
|
United States, 6, sales total |
$38.180 |
France, 4, sales total |
$25.820 |
UK, EU, Israel, 1 each, sales total |
$14.680 |
Russia and China, 1 each, sales total |
$10.360 |
And the next 70 (to round out the top 100) are based in: |
|
United States |
28 |
United Kingdom |
6 |
Germany |
4 |
Japan |
4 |
South Korea |
4 |
Turkey and Israel |
2 each |
Sweden, Canada, Australia, Poland, Spain, Norway, Italy, France, Singapore, Taiwan, EU, and Ukraine |
1 each (12 total) |
Russia |
5 |
China |
1 |
And India (nonaligned) |
2 |
Financing sources are critical for technology innovation—new products, whether involving AI, SCs, QCs, or biotechnology, or in the other domains noted in this chapter, simply don’t get developed unless they are adequately financed. That money can come from public sources, but frankly if too much comes from the government, then the public overseers of those funds will inevitably serve to slow down, compromise, or often downright destroy the innovation, even if the bureaucrats exert the best of intentions. A core argument in this book has been that in an autocracy especially, innovation can be held back, if not entirely thwarted, because of the heavy hand of the autocrat or one of his sycophantic enablers; but frankly, even in democracies, government civil servants, as well intentioned as they are, shouldn’t try to pick winners in technology submarkets. They have neither the expertise nor the incentive to do it expertly. Therefore, the amount of private funding, and the added value behind it—such as is brought to the relationship with the start-up or early-stage entrepreneur by experienced venture capital investors who have built, operated, and grown tech companies themselves—is central to the success of a technology innovation ecosystem. No money, no breakthroughs—it’s just that simple.
Set out below are statistics showing the relative size of the venture capital investments made in the top ten recipient countries of such financing over the past five years. Venture investment is critical for early-stage technology companies. At the other end of the financing spectrum are the stock exchanges for public companies; set out below are the relative sizes of the stock exchanges in about twenty countries. (These figures include all companies, not just those focused on technology businesses.) In both cases, the premier role of the United States in financing new and established businesses is readily apparent. They also show, however, the important aggregate contribution of the other leading democracies as well; in the last two years, the venture investment in the other five leading democracies (excluding the US) itself exceeded China’s venture investing. The same result is seen in Table 17, showing the size of public stock exchanges; again, leaving out the US for a moment, the size of the stock exchanges in the other democracies, in the aggregate, is more than twice that of China. Alliances certainly matter, especially when it comes to Cold War 2.0.
Democracies |
2018 |
2019 |
2020 |
2021 |
2022 |
US |
149B |
156B |
175B |
364B |
245B |
UK |
12 |
18 |
17 |
41 |
31 |
France |
5 |
6 |
6 |
14 |
16 |
South Korea |
5 |
5 |
5 |
16 |
15 |
Germany |
6 |
9 |
7 |
21 |
12 |
Canada |
5 |
7 |
6 |
16 |
11 |
Israel |
4 |
4 |
5 |
11 |
8 |
Total (Dem) |
186 |
205 |
221 |
483 |
338 |
Autocracies |
2018 |
2019 |
2020 |
2021 |
2022 |
China |
108 |
65 |
61 |
84 |
61 |
Nonaligned |
2018 |
2019 |
2020 |
2021 |
2022 |
India |
13 |
17 |
15 |
43 |
25 |
Singapore |
6 |
5 |
4 |
8 |
8 |
At the other end of the capital markets spectrum, here is the size of the stock exchanges of the top twenty-one countries (calculated by the World Bank in the 2020 period):
Democracies |
Total Market Cap |
Percent of GDP |
No. of Firms |
United States |
44.7 trillion |
194 |
4,266 |
Japan |
6.7 |
122 |
3,754 |
United Kingdom |
3.2 |
100 |
1,858 |
Canada |
2.6 |
160 |
3,922 |
France |
2.3 |
85 |
457 |
Germany |
2.2 |
60 |
438 |
South Korea |
2.1 |
133 |
2,318 |
Taiwan |
2.0 |
267 |
1,627 |
Switzerland |
2.0 |
267 |
236 |
Australia |
1.7 |
129 |
1,902 |
Sweden |
1.3 |
230 |
832 |
Netherlands |
1.1 |
132 |
103 |
Spain |
.7 |
59 |
2,711 |
Total Democracies |
72.6 |
N/A |
24,184 |
Autocracies |
Total Market Cap |
Percent of GDP |
No. of Firms |
China |
13.2 |
83 |
4,154 |
Saudi Arabia |
2.4 |
347 |
207 |
Iran |
1.2 |
635 |
367 |
Russia |
.7 |
46 |
213 |
Nonaligned |
Total Market Cap |
Percent of GDP |
No. of Firms |
Hong Kong |
6.1 |
1,768 |
2,353 |
India |
3.2 |
100 |
5,215 |
South Africa |
1.0 |
348 |
264 |
Brazil |
1.0 |
68 |
345 |