The global challenge is bigger than China

The global challenge is bigger than China
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President TrumpDonald John TrumpEsper sidesteps question on whether he aligns more with Mattis or Trump Warren embraces Thiel label: 'Good' As tensions escalate, US must intensify pressure on Iran and the IAEA MORE is firing the opening salvos of a two-front trade war, one in the west against advanced economies and allies, and the other in the east against China. While some critics oppose trade wars in principle, others think that we should unite with our allies against China. The fixation with China is understandable. It is the rising elephant in the room. However, the global economic transformation is larger than China, and efforts to contain China are likely to backfire.

We have a 200-year-old habit of viewing “the West and the rest” as respectively the center and periphery of the world economy. It is no longer true. In this century the annual growth rate of the combined economies of the developing world surpassed that of the developed world each year, and in 2008 the developing world out-produced the developed world for the first time in modern history. According to International Monetary Fund data, within 10 years the developing world is likely to be twice as productive as the developed. China is a big part of the growth — approximately one-third — but even without China, the emerging market and developing countries now have twice the production of the European Union.

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China may be the elephant, but there is a whole savannah full of others, and they are growing fast — as fast as China, and faster than us and our rich friends.

 

The current average growth rate of developing countries is double that of advanced economies. And some do better than China. The economy of Ethiopia, a country long known in the world press for famines and civil wars, has outperformed China every year since 2010. Of course, Ethiopia started from the bottom and it is still a poor country, but as they say about the U.S. debt, a billion here, a billion there, and after a while it begins to add up. And Ethiopia is the second most populous country in Africa.

As with China, the developing world’s production is as much a product of population size as it is increased productivity. The per capita production for the developing world is only a quarter of that of the advanced economies, but its population is six times that of the wealthy countries. Despite the changes in the volume of global production, major changes in the rankings of national wealth are unlikely. And larger populations have budgetary consequences. A family of 12 might have a more income, but it has to buy a minivan and be careful where it goes for lunch. A family of two may have less money but drive a Miata and choose lunch by Zagat ratings.

The changes in the global economy are more than a national numbers race. As production in the global south grows, so do its markets. Asia without China and Japan uses half again as much steel as the European Union. Older patterns of producing raw materials for the rich are supplemented by south-south trade, and all trade benefits from better communications and logistics infrastructure. China is the leading example, with 60 percent of the world’s high-speed rail, but it is by no means alone. Uzbekistan has more high-speed rail than we do. Moreover, China is investing massively in financing and building the necessary infrastructure for expanding south-south trade.

While we tend to view ventures such as the Belt and Road Initiative and the Asian Infrastructure Development Bank in terms of global rivalry, to the countries involved these initiatives are facilitators of regional and global growth. Certainly not all projects will succeed, but even without China the economy of developing Asia is four times that of Germany.

So regardless of the wisdom of trade wars, is it time for the West to circle the wagons? Digging in our heels may soothe our anxieties about how the world is turning, but we are not likely to reverse its course. The global south is growing faster because it has more room to improve its productivity, education, and health. If we and other wealthy countries pursue regressive policies, it will simply create political space for China to act as the avatar of the rising world. China’s new arrogance might alienate its neighbors, but our efforts to contain China are likely to isolate ourselves from global growth. We are posing a choice for much of the world between our sticks and China’s carrots. Which would you choose?

The world is becoming smaller, larger, flatter and rounder, and all at the same time. Smaller, because of greater complexity and immediacy of contact. Larger, because what happens “out there” —and even “way out there”— becomes more important. Flatter, because the old patterns of hierarchy are diminishing. Rounder, because what goes around, comes around faster. America has been on top of the world for 70 years, and so the change looks threatening. But getting off is not an option, and China is not the basic problem.

Brantly Womack holds the C.K. Yen Chair in foreign affairs at the University of Virginia’s Miller Center. His most recent book is “Asymmetry and International Relationships” (Cambridge University Press, 2016).