It took two World Wars for the sun to finally set on the British Empire and Pax Americana to entrench itself. It will take just one Trump presidency to herald its successor, the more subtly named Asian Century.
People tend to get more exerted over Donald Trump’s economic agenda than over his statements on geopolitics, after, of course, passions are expended on his politics of race and gender, whose flaws are self-evident. But Trumpian economics is likely to prove unsustainable and, therefore, short-lived.
Take the policy of immediate concern to India, the new US president’s intent to clamp down on H1B visas for Indian techies, so as to force companies in the US to hire more American workers. This plan will not work. Unemployment rate in the US technology sector is something like 2%. There is a severe shortage of engineers, pushing up their salaries.
There are two reasons for such shortage. The proximate one is that not enough college-going Americans opt for Science-Technology-Engineering-Maths (STEM) courses. There is another, more fundamental problem. Not enough Americans are going to college, because there are not enough college-age Americans. Nor are there enough college-age Germans or Britons or Frenchmen or even Chinamen.
India will account for some 136 million, fully one quarter of the addition to the global workforce in the current decade. China will add less than a fifth of India’s contribution. (Based on these numbers, Morgan Stanley’s Chetan Ahya forecast in 2010 that India’s growth rate would overtake China’s by 2015.) The largest number of young people taking an engineering course will be from Indian. After that, it would the turn of Africans. This is the simple reality of the world’s demographics. Trump cannot change that.
Before Artificial Intelligence develops to a level that can dispense with the average engineer, the world cannot dispense with Indian engineers. What visa regime these engineers work under is a matter of detail.
What about those trade wars Trump has threatened? Ignorance is bliss on the campaign trail, but unworkable in the White House. As much as 40% of the value of those nasty Mexican exports to the US that Trump detests comes from inputs produced in the US, by American workers. If those exports are halted, the US economy would lose those jobs.
What about the promised trade war against China? Cheap imports from China account for more than 50% of the consumption basket of poor and less well-off Americans. If these imports are made more expensive through penal tariffs, the standard of living of millions of Trump supporters would take a nose dive. Prices would rise, as would wages and, eventually, interest rates. One thing guaranteed not to rise would be presidential popularity.
No, it is not his economics that matters, but his isolationist streak. America First means, in Trumpian Lexicography, that Americans should spend on America’s defence rather than on protecting other countries. Hence his sentiment that Japan and South Korea should fend for themselves rather than live under an expensive American protective umbrella. Nato, says Trump, is a relic from the Cold War past that does not take into account the emergence of such a likeable, like-minded leader like Vladimir Putin in Russia.
Now, not all members of Trump’s cabinet appear to share this isolationist streak. But Trump should be expected to make dissenting appointees fall in line rather than the other way around.
Trump has promised a spending spree on American infrastructure, to create more American jobs. This would matter more to his supporters than the money spent on American bases in Korea, Japan or the Philippines.
China is in the process of beefing up its defence capability. The size of the Chinese economy today, at a little over $10 trillion, is the size of the US economy in 2000, when it was the world’s undisputed sole superpower. Some might carp that China is far behind the US in terms of per capita income. When it comes to projecting power, absolute income matters. A tiny economy might have a high per capita income but its entire GDP might not buy a single modern aircraft carrier. By withdrawing the US from the Trans Pacific Partnership, Trump just foreclosed the option of the US writing the rules for modern economic engagement among countries that account for some 40% of the world’s output. When Australia’s prime minister Malcolm Turnbull invited China to join the TPP, after the US turned its back on the deal, he opened the way for China to write those rules.
China has just shown off its first aircraft carrier. It is building a few more. It is building a new silk route across Asia to Europe, investing huge amounts of money that buy influence and shift loyalties. If the US scales down its international engagement in the name of America First, China will move in to fill the space vacated. It will become stronger, as would its client states, including one it cultivates to our west.
In response to perceived Chinese ascendance, Japan, Korea, Vietnam, Indonesia and India would all scramble to beef up their security. Abe would likely win support for his mission to junk Japan’s pacifist constitution. American and European firms would lap up hefty Asian defence orders.
Thus would Trump catalyse the Asian century.
