Global race for supremacy

History bears witness that powerful nations have peacefully competed or gone to war to attain regional and global dominance. At the end of World War-II in 1945, Britain had won — but at a great cost. Its economy had been seriously impaired and so was that of its allies, and the US clearly emerged as the lone economic and military superpower. The US is still the largest economy but is now under threat by China. In the last few decades, the Chinese economy has been on the rise fueled by its extensive manufacturing infrastructure and rapidly growing technological base. The US has, however< maintained its supremacy due to its startup culture that incentivises risk-taking and innovation.

Competition between nations is not new and historically has been the norm. But the rapid rise of China and the trajectory of its economic growth, according to the US, have not been based on fair practices, including industrial espionage. And if not checked, it could disincentivise investment and creativity, impacting the global economic growth. Such allegations are not new, as many major growing economies in the past have been accused of similar practices. Even the US at one time apparently benefited in the design and development of some high-tech military equipment by copying German technology.

The rivalry between the US and China is also a clash between two very different political and economic systems. Which model would prevail in the end and what would be the major factors contributing to the success or failure need to be assessed? Innovation requires freedom of thought, a liberal environment and a culture of risk-taking where failure is not punished but is looked at as learning experience. The US has instilled a culture of risk-taking and its economy can sustain it.

An innovative environment also has to be supported by extensive network of Research and Development organisations that in turn require qualified and experienced engineers and scientists. To establish and maintain R&D and industrial organisations requires a continuous flow of talented human resource and funding.

Only those countries that have established this elaborate network are able to sustain high production and innovation. In terms of manufacturing capacity, there is no other country that has the manpower and support infrastructure to scale as China can. This is an area where its superiority is unquestionable. The way it can mobilise people and direct them due to the hold that communist party or government exercises is obviously not available in free societies.

There are nevertheless certain major weaknesses that China will have to focus to compete with the West in the long-term. It will have to update its education system to develop the culture of questioning of status quo and the thirst for enquiry to compete with the US and Europe in technology and science. However, China’s political system is authoritarian and does not encourage independent thinking. It is also doubtful if Chinese authorities would allow total freedom to institutions engaged in pursuing scientific and technological endeavors.

For the US to compete with China in manufacturing it will have to invest in the supply chain eco system as well as automation. There is always a flip side to any upgradation. For example, automation would require the US to find alternate means of livelihood for those who lose their jobs. It means retraining whole new areas of investment — not an easy proposition by any means — the US will not be able to compete with China in low-tech products such as toys, home accessories, cycles, etcetera.

In defence equipment and technology, China is trying to build a solid manufacturing and R&D infrastructure and has made huge strides but would still take few years to be close to the US or even some of the European countries. It has to be seen as to what extent China would benefit by procuring Russian military hardware and technology. We need to keep in mind that notwithstanding China’s serious efforts to calm the political environment and reduce apprehensions about its economic policies, the US, Japan, South Korea and European countries are all strengthening alliances to counter China’s rise. It is not surprising that the economy of all these countries is closely integrated with that of China and it is not easy to find an alternative.

The latest President Biden’s policy of cracking down on Chinese apps, and adding several Chinese companies to the US investment blacklist reflects how wary the administration is of their penetration and dominance in the US market. China has responded with caution and restraint but realises that its relations with the US have entered an adversarial phase and it would have to adjust its external and internal policies to confront the emerging reality.

For Pakistan it poses a new set of challenges, trying to maintain its strong strategic and economic relations with Beijing and keeping the avenues of cooperation with Washington open. However, with Taliban in Afghanistan occupying provincial cities and Afghan government crumbling, the possibility of any negotiated settlement has totally faded. Unfortunately, the unreasonable and hostile attitude of the Afghan government that is under heavy influence of India places Pakistan in a difficult situation. Dealing with US in this chaotic regional environment is not easy.

In the last few decades success of the international trading systems and overall increase in global GDP has been the cooperation and interlinking of economies. It is only through the successive implementation of this cycle that high tech major powers are able to sustain mass production and innovation. As indications are, the US and Europe may introduce new rules and regulations to prevent China from acquiring high-end technology. These measures could distort the functioning of free market enterprise and push back the very forces inherent in its success. Moreover, which other country or group of countries could the US trade with on such a mass scale as China and be one of the engines of its economy?

The new ‘Cold War’ would have a ripple effect on countries such as Pakistan and dealing with it would be a major challenge.

Published in The Express Tribune, August 11^th, 2021.

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