Political madness has its price. This year the price will be paid. China’s re-emergence is putting the United States under enormous internal political pressure. The US is crumbling under that pressure, failing the first real test of its global dominance in the post-war era. Europe, too, is struggling to sustain its war-driven commitment to peaceful economic integration, as Britain’s political geniuses execute the idea of leaving Europe to relive the empire’s glory days. Here in Australia, conservatives who yearn for a bygone white, Christian-dominated colonial era have terrorised Liberal Party moderates, carrying out their threat to destroy the Coalition village in order to save it.
Until around the year 1500AD the countries with the biggest populations also had the biggest economies. The reason was that the labour productivity levels of different countries were pretty similar; there hadn’t been major inventions that gave one country an advantage over others. Then along came The Enlightenment in Europe, led by thinkers such as Adam Smith, David Hume, Isaac Newton and James Watt who is credited with inventing the steam engine. Before long, Europe was experiencing the Industrial Revolution, sending its labour productivity into the stratosphere and leaving heavily populated China and India behind.
By subsequently turning inwards China compounded its disadvantage. But 40 years ago last month, Deng Xiaoping began the process of China’s opening up, leading to its breathtaking re-emergence to become the world’s second-largest economy.
China’s population is more than four times that of the United States. When China’s labour productivity reaches half US levels, its economy will be twice the size of America’s. All that’s holding China back is the technology gap between the two countries. That’s why China is deploying every means at its disposal to bridge the technology gap.
As China catches up, the US is melting under the pressure. The American people have elected a President who has promised he will return manufacturing jobs from China. But those jobs have already left China for lower-wage countries or are being replaced by artificial intelligence. They are not coming back.
President Trump’s promise to Make America Great Again has manifested itself in a trade war with China that he claims America is winning but which both countries are losing. While China is slowing down, the US stock market, the President’s signature of his success, is freaking out.
President Trump’s debt binge is causing the Federal Reserve to hike US interest rates. The finalisation of the Mueller investigation into Trump and family members will put the President under enormous personal pressure in 2019 at a time when the American economy will need deft leadership. So will various investigations initiated by the Democrat-dominated House of Representatives that took office on 3 January 2019.
Across the Atlantic, Britain’s Prime Minister is struggling to handle the country’s greatest crisis since World War II. Prime Minister May will probably not gain House of Commons support for her Brexit deal. Labour will oppose it rather than expose its internal differences on the matter. So will Boris Johnson and the hard-line conservatives who came up with this hair-brained idea purely to advance their own political careers, never believing Brexit would get up.
Europe cannot contemplate offering the UK a more generous deal for fear of other countries insisting on the same terms to leave the union. A hard Brexit will plunge the UK economy into recession and imperil the Good Friday peace agreement between Ireland and Northern Ireland. It’s a disaster born of political opportunism by the conservatives.
Here in Australia, hard-line conservatives have been active too, driving the Coalition government further to the right under threat of bringing it down. Their characterisation of climate change as a hoax will cost them dearly in the big cities where Labor will pick up seats, especially in Melbourne, and quite possibly in drought-stricken regions where independents could take seats from the Nationals.
The Australian economy is weakening. Car sales have collapsed, the banks are tightening credit in the aftermath of the Banking Royal Commission and private investment is feeble. With GDP barely growing in the September quarter, a negative quarter in 2019 is not out of the question.
If Parliament resumes in February, as scheduled, it will be chaotic, the government having lost its majority after sacking a generally popular prime minister and treating its women MPs poorly.
In the US, Britain and Australia, madness is exacting its price, while China continues its resurgence towards the podium of the world’s largest economy. It would be wise if the three countries, and more, took time out from their internal political squabbling and engaged China in the shaping of a new world economic and geopolitical order.