In a grand overturn of recession fears, the US economy closed out the year with 3.2 per cent growth in the last quarter, managing an annual expansion of 2.5 per cent – on a par with the World Bank’s global growth forecast of 2.6 per cent. With global economic expansion set to slow this year to 2.4 per cent, the US could still tread water at around 2 per cent.
But while the US is able to sustain growth through its growing fiscal and trade deficits, albeit a worrying debt habit, much of the rest of the world is languishing.
Given that the next US president, whether Trump or Biden, is likely to continue America’s spending and debt spree, will the rest of the world continue to fund it?
In the short term, there seems to be no alternative to putting one’s money in the dollar.
For the Middle East, oil prices may well remain flat, depriving it of any additional ballast as oil producers try to build a new foundation in renewable energy.
Yet in the medium term, counting on the US to be the key engine of global recovery is simply not realistic.
China’s plan for ‘new productive forces’ should make the West sit up
China’s plan for ‘new productive forces’ should make the West sit up
Increasingly, the global rivalry for leadership is not just about military or financial power, but also about technological edge and its ability to generate wealth.
But while China’s spending on research and development is fast catching up with the US budget, “US tech giants still dominate research and innovation in critical technologies such as AI,”, noted Marina Yue Zhang, a professor at the University of Technology Sydney. China’s tech champions have not yet achieved the levels of monetisation through stock market wealth that their US peers have.
The global contest therefore hinges on who can convert AI technology into productivity across the broad economic front.
China’s rise as world’s green factory has put West on the back foot
China’s rise as world’s green factory has put West on the back foot
For now, it is widely accepted that the US is in the lead, followed by China, while the rest of the world struggles with the application of AI in day-to-day consumption, production and distribution functions. Poor developing countries that fail to upgrade their productivity through AI and knowledge-based innovation will be stuck in low-tech.
The US-China technological race is shaping up into a long march of hegemonic proportions. But history is shaped by multiple structural forces and random events, and the ultimate 21st century winner may be neither of the two front runners nor anyone else on the radar.
In a “pluriverse” of possibilities, those that work hardest to innovate with new technology may be the survivors in the end. As St Matthew said: “Blessed are the meek, for they shall inherit the earth.”
Andrew Sheng is a former central banker who writes on global issues from an Asian perspective