Well, they do, but here is the thing they are afraid of:
Before WW2 the US economy was doing poorly. The war brought a lot of war manufacturing business and huge boom in the US occurred thanks to the war production.
Economist at the time were afraid that the end of war will kill the boom because there will be no more war production needed. Well, once the war was over big US companies just switched their production capacity to civilian markets: cars manufacturing, appliances, houses construction... there was no contraction after the war. Opposite: 50s were the time of enormous economic boom.
Now, you are mistaken with setting "Prisoner dilemma" as the problem foreigners have. They may also look at their situation from the same perspective as Americans did during WW2. That is: If we stop producing for the export to the US (war effort) - there will be crisis. Who will buy our stuff but the American consumer. Well, no fear. Just switch production to your domestic markets as US did by switching industrial production to its domestic market after WW2. Nothing bad will happen with China the day "war" will be over and China will stop exporting production to the US. They will just realize that they have huge 1.3 billion consumer market at home and no need to export to the US. They will just switch production.
Therefore, Prisoner's dilemma has nothing to do with the fear of losing market based on false predictions. Nothing happened to the US market once the war was over. Nothing will happen to China once its main customer goes bankrupt.
This idea of the war as a creator of strong economies doesn't stand up.
If it was then we could create wealth by wandering down the road and throwing bricks through people's windows and smashing up their cars.
Wars cause a sudden drop in population, which causes labour to become more valuable (historically something that tended to happen after major plagues), so there are individual stories of improved circumstance. Wars also require people to make sacrifices in their standard of living and succeed in achieving this more easily than under other circumstances.
Regardless of all of that - you can't demonstrate that the US in the 50s had a stronger economic situation than it would have done had it been allowed to continue along its course without a war.
> Nothing will happen to China once its main customer
> goes bankrupt.
If we see a major downturn in consumption as a result of the things that are unfolding now, I'll be expecting massive upheaval in China. People have seem general improvement with the party's policies to date but will become less accommodating when the state continues to take a share of a shrinking pie.
Well, once the war was over big US companies just switched their production capacity to civilian markets
It's not quite as simple as that; the US was the only major industrial power that didn't need to rebuild its infrastructure from rubble. That gave the US a huge leg up. Granted it was subsidising reconstruction in the rest of the world, but that also served to create markets for exporting to. If it hadn't been for WW2, the British Empire would still be a - if not the - superpower today.
They have a prisoner's dilemma because the first country that drops the dollar (in a big way) wins. The last guy holding the dollar (the prisoner who doesn't snitch) takes the worst of it. If they all hold steady, they all lose--somewhat.
> huge boom in the US occurred thanks to the war production.
Myth. Every meaningful measure of standard of living and financial conditions continued to deteriorate through the war. Unemployment only went down because millions were drafted. GDP temporarily went up because of war materiel purchases, but this had no knock on positive economic effects.
> Nothing happened to the US market once the war was over.
Yes it did. Unemployment shot way up. It looked like the depression was going to continue just as it had. The difference was that most of the New Deal was scaled back. The government lowered intervention in the economy compared to the 30s and growth took off. The war did absolutely nothing to end the depression and made life worse.
Economist at the time were afraid that the end of war will kill the boom because there will be no more war production needed. Well, once the war was over big US companies just switched their production capacity to civilian markets: cars manufacturing, appliances, houses construction... there was no contraction after the war. Opposite: 50s were the time of enormous economic boom.
Now, you are mistaken with setting "Prisoner dilemma" as the problem foreigners have. They may also look at their situation from the same perspective as Americans did during WW2. That is: If we stop producing for the export to the US (war effort) - there will be crisis. Who will buy our stuff but the American consumer. Well, no fear. Just switch production to your domestic markets as US did by switching industrial production to its domestic market after WW2. Nothing bad will happen with China the day "war" will be over and China will stop exporting production to the US. They will just realize that they have huge 1.3 billion consumer market at home and no need to export to the US. They will just switch production.
Therefore, Prisoner's dilemma has nothing to do with the fear of losing market based on false predictions. Nothing happened to the US market once the war was over. Nothing will happen to China once its main customer goes bankrupt.