The US Can Still Renew its Global Economic Leadership

The US Can Still Renew its Global Economic Leadership

By Ikechi Emenike

    THE Chinese are not even saying much. Perhaps, this is in line with the advice of their former paramount leader, Deng Xiaoping, to “Hide your strength, bid your time ……” But it is impossible not to see their hands everywhere.

    Their economic prosperity has emboldened them to forage into all corners of the world, pushing Chinese products, services and culture. Yet, despite her inner strengths, China is often underrated.

    There is a tendency to portray the ancient giant as an upstart or another third-world country, forgetting that this was once the largest economy in the world, until 1890 when the US took over.

    It has always been the ambition of every Chinese to restore their nation to the top economic spot. Most Chinese still remember, with nostalgia, the 1937 stirring speech of the legendary Chairman Mao, to his fellow citizens that the path to success is to produce what the World wants. That was the foundation for turning China into the World’s production factory for all manner of goods (both good and bad). Naturally, money poured into China from all corners of the globe, trade surpluses followed and their GDP continued to soar.

    Similarly, the US earns money abroad through its exporting industries in arms/defence, oil drilling/gas extraction, petroleum refining and Brand Name, pharmaceuticals/other manufacturing, among others, but earns nothing from the export of democracy and human rights.

    Even discounting China’s unfair trade practices, the reader can easily see the direction of the pendulum when one party earns income from all its exports and the other earns from just some. Moreso, the US is neither interested nor willing to participate in several critical areas of the African markets where China dominates and indeed thrives, such as construction, transportation, and solid mineral extraction, among others.

    While African leaders are happy to receive Chinese goods and services, they are blind to the Asian giant’s economic management approach. For example, modern Chinese leaders see poverty as a challenge and an opportunity for growth, but some African leaders relate to poverty as charity, while many more see poverty as a plaque that should be derided or avoided. In the process, Chinese authorities have transformed millions of their poor citizens into growth agents.

    Little wonder the Chinese economy soared from a per capita income of $203.33 in 1982 to $12,743.14 in 2022. For this reason, the Chinese GDP surpassed the USA in purchasing power parity terms. Many American citizens panicked. Some even thought that this would mark the end of the “American Empire”. The influential Economist magazine stated as much. The World Bank and the IMF followed.

    Also not to be left out are several leading lights in the US economy, such as Larry Summers, President Emeritus at Harvard University and former Secretary of Treasury; Kenneth Rogoff, Professor of Economics at Harvard University and former Chief Economist at the IMF; and Professor Jeffery D. Sachs, Professor of Economics at Columbia University and President of the UN Sustainable Development.

    But after deeper reflection, all the prominent voices mentioned above and many more in the West reversed themselves. They have realized that there is more to global economy dominance than exports, brick and mortar. Fact is that the subsisting role of the dollar as an international reserve currency, the enormous global goodwill, depth, and openness of the US economy suggest that China still has more miles to cover. Moreso, the US is determined to revive its manufacturing base. One of such moves is the 2022 Inflation Reduction Act.

    However, the greatest enabler of the Chinese surge to the top is the US itself. This is simply by the fixation of the US authorities that their economy cannot grow beyond 3%. So, while China, even at the worst of times, strives for double-digit growth but is often compelled by realities to settle between 6% and 8%, the US, which has already set a psychological ceiling of 3%, continues to lag behind.

    Of course, the US limitation draws strength from the economic thought that because “advanced economies” are close to full employment, they, therefore, can only achieve modest economic growth rates. This thinking is obsolete.

    No matter how tight a corner is, anyone with an elbow and enlightened insight can create the requisite elbow room, depending on his underlying will and capacity to manoeuvre. With a new thinking cap and fresh work clothes, the US economy can achieve between 6% and 8% annual growth rates too. Even France, Germany, and the UK can also realize between 5% and 6% GDP growth rates.

    GDP Percentage Growth Rates
    S/N Country 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
    1. United States 2.28% 1.84% 2.29% 2.71% 1.67% 2.24% 2.95% 2.29% -2.77% 5.95% 2.06%
    2. Germany 0.42% 0.44% 2.21% 1.49% 2.23% 2.68% 0.98% 1.06% -3.70% 2.63% 1.79%
    3. United Kingdom 1.45% 1.82% 3.20% 2.39% 2.17% 2.44% 1.71% 1.60% -11.03% 7.60% 4.10%
    4. France 0.31% 0.58% 0.96% 1.11% 1.10% 2.29% 1.87% 1.84% -7.78% 6.82% 2.56%
    5. China 7.86% 7.77% 7.43% 7.04% 6.85% 6.85% 6.75% 5.95% 2.24% 8.45% 2.99%

    The performance of the US economy in 2021 has put a lie to the notion that the US cannot record high GDP growth rates. Some have even argued that it is a one-off, short- term happenstance. However, arguing without conceding that to be the case, even critics should come clean that, at long last, the US economy recorded a growth rate way outside its traditional 0 to 3%. Moreso, if this happenstance were to be repeated over a couple of years, the outlook of the US economy would be different. After all, it is accepted that piecing together several short terms is one way of creating a sustainable long term.

    Fundamentally, curious observers would want to find out the 2021 economic policies that were implemented in the United States, UK, and France, which enabled their GDPs to rival China’s. Even Germany jumped from a depth of 3.7% to a healthy 2.6% growth (see table). Even if conservative puritans, on ideological basis, quarrel with the policies that produced such results, the 2021 figures have demonstrated that China does not have the monopoly of robust economic growth; that with the right policies, including private sector-led initiatives, other nations can also achieve higher GDP growth rates.

    Emenike, an Economist, is a Nigerian.

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