November marks the 25th anniversary of the fall of the Berlin Wall.  One of the totemic structures of the Cold War came down.  But with conflict between the U.S. and Russia heating up again, is another Cold War in the offing?  More importantly, will Cold War 2.0 end the same as did 1.0, with a U.S. victory?

In one sense, the conflict has already begun.  The U.S. and Russia are grappling over Ukraine, beginning with the U.S.-sponsored coup against the democratically elected Ukrainian government in February.  At the same time, the U.S. has been working to overthrow Russia’s allies in Syria and Iran.  Conflict through such proxies was one of the hallmarks of the first Cold War—think Cuba, Korea, Nicaragua, and Vietnam.   It’s the reason the Cold War was “Cold.”  The protagonists never fought each other directly.

But Cold War 2.0 pits the U.S. not only against Russia, but against China as well.  And the outcome for 2.0 may be quite different than it was for 1.0.  This should give the U.S. pause before it escalates any further.

The U.S. is a much less formidable power today than it was when the Cold War started at the end of World War II.  It was the only major participant in that War that was not devastated by the fighting.  In fact, its economy was strengthened, mightily.  Its political and cultural systems were bolstered as well.  In the entire history of the world, there has never been so great an asymmetry of power between one nation and the rest as there was at the beginning of Cold War 1.0.

Today, things are dramatically different.  Other countries have caught up with and even surpassed the U.S. in economic power.  Last month, China’s economy became the largest in the world in purchasing power parity terms.  It is China that loans the U.S. hundreds of billions of dollars a year needed to fund its budget and trade deficits.  It holds some $3 trillion of U.S. notes from this lending.  Going to war with your banker may not be the smartest idea...