The global reach and importance of the Big Three

The US is the world’s biggest economy and third most populous nation. China is the world’s second biggest economy and most populous nation. India is the world’s second most populous nation. Their economic, social, military and political activities have global significance, especially as each fights for its own perceived geopolitical importance.

The US, China and India have much in common in how they view and aspire to their respective national interests. How they behave internally and with each other have the potential to disrupt other nations and risk a world littered with geopolitical collateral damage.

Adding layers of complexity to the inter-actions and relationships between the US, China and India are their political constraints and political drivers (and personalities) of their respective leaders. The US and India have populist incumbent elected leaders who are very aware of, perform to and frame policy around their respective election cycles. China’s leader not only wears none of those labels but can (and does) frame long term policy without the restriction of election cycles.

In many areas of geopolitical influence, the US is in decline (not surprising given its isolationist trade policies in response to globalisation). It is resisting (or in denial of) that decline and its waning global geopolitical dominance, and fighting off its perceived challengers.

China is slowly catching up to or, in some cases overtaking, the US in its global economic, military and geopolitical influences, much to the frustration of the US.

The COVID-19 pandemic has added a layer of complexity to the direct relationships between and influences of the US, China and India. The coronavirus pandemic hurt China initially but China rebounded quickly. The US and India lag China in their efforts to contain COVID-19 and return their respective economies and global geopolitical standings to their pre-COVID positions – much of that lag and their sluggish and haphazard response to the pandemic can be laid at the feet of their populist leaders.

India has always taken a more introspective approach with international relations, compared to the US and China, but has always been assertive when it comes to its borders, especially those with Pakistan and China. Equally, China is also asserting itself with its borders, territories (currently focused on Hong Kong) and shipping lanes (currently focused on the South China Sea) while the US is shoring up its border with Mexico.

The US and China, in their battle to be the world’s number one in terms of economic, military and geopolitical influence, are seeking partners and allies. Other nations that take sides in such a battle will only increase the list of collateral casualties and further hamper the global recovery from the damaging effects of the COVID-19 pandemic. As difficult as it will be, not taking sides between the US and China will prove to be a nation’s strategy for survival.

Never poke an eagle or a (panda) bear

An increasingly relevant sideshow to the effects of, fight against and recovery from the COVID-19 pandemic is the November US Presidential election. Donald Trump has begun his re-election campaign using many of the same themes and ‘tools’ that got him elected in 2016, mainly bluster, bullying (anyone who disagrees with or argues against him), isolationism and consistent selection and redefining of facts and the truth. As a result, the US is facing the erosion of its status as the global superpower.

China seems to be taking the opportunity presented by Trump’s bluster, poor judgement, lack of leadership and isolationist moves to fill the global leadership gap left by the US, to show the world that China is the equal of (or greater than) the US as a global superpower and to tidy up what it sees as domestic matters. The World Health Organisation is just one battlefield between the US and China.

China is quietly but assertively absorbing the Trump Administration’s anti-China vitriol. At the same time, it is escalating the addressing of longstanding domestic matters, such as the integration of Hong Kong into the People’s Republic of China, the security of shipping lanes in the South China Sea (the recent sinking of a Vietnamese fishing boat), the security of its land borders (the escalating stand off on the India-China border) and the safety of its citizens overseas (China’s actions in response to the extradition proceedings of the Huawei CFO who is also the daughter of its founder).

The US and China, in attacking each other and the other’s perceived allies, in their battle to be the world’s biggest geopolitical influencer, risk spreading their animosity throughout the world. Rising tensions between the US and China have the potential to inflame and divide the world, with serious geopolitical, economic and military consequences for everyone, more so in this fragile coronavirus period.

Is the collapse in car sales the canary in the coal mine for the US economy?

Trends in car sales are a significant indicator of economic activity in all but some emerging market economies because of their linkage to household confidence and spending. For example, the growth in car sales in China have accompanied that country’s recent economic rise. China recently overtook the US as the world’s largest car market and is on track to overtake the US to become the world’s biggest economy.

Just released data on US car (auto) sales in April makes alarming, but not surprising, reading. Compared to April last year, US auto sales for Toyota were 54% lower, Subaru’s sales were 47% lower, Mazda’s were 44% lower, Hyundai’s were 39% lower and Kia’s 38% lower. Others, notably GM, Ford and Volkswagen, release sales figures quarterly, so their official numbers for April are not available although their sales for the March quarter were down by slightly less than the above-listed manufacturers and forecasts are for sales in May and June to be just as dire as in April.

This begs the questions – are US car sales and prices going down the same path as the US oil market went in April and what does that mean for the US?

Both US auto and oil markets have suffered a sudden drop in consumption and sales because of the responses by businesses, households and (State and Federal) governments to the COVID-19 outbreak in the US. Both have run into storage problems and costs because of the product pipeline, which is more alarming for the car industry because of its ‘just in time’ inventory management. Car (auto) manufacturing has collapsed to a trickle in the US, China, Japan and Europe.

A number of US oil production, drilling, exploration and supplier companies, led by the more vulnerable and leveraged, have folded or are staring down the barrel of bankruptcy. Given the expected drastic contractions in US economic growth, employment, business investment and household spending, I have two questions:
– are car prices in the US (and, by association, the rest of the world) heading down the same path as oil prices?
– are auto manufacturers in the US heading down the same path as companies in the US oil industry?

An affirmative answer to both questions will have severe explicit and implicit implications for households, businesses, governments, economies and future generations in the US and around the world.

US and India – twins by another mother

A nation and its people are judged by how the weakest are treated. To quote Pearl S Buck – “the test of a civilisation is the way that it cares for its helpless members.”

COVID-19 has shown itself to be capable of spreading virulently, irrespective of differences in societies and people. It ruthlessly attacks most often where a predisposition or weakness exists, i.e. through genetic, health or social circumstances, which brings into stark relief the similarities and differences between many nations’ healthcare and political systems.

A critical factor in each nation’s response is how its health system treats the poorest, weakest and most socially outcast because a nation’s health system gives an insight into that nation’s sense of equality, justice and fairness, as well as an insight into its social principles, political establishment and economic strength.

The US is the world’s biggest economy and democracy in GDP terms (the definition of which is a topic for another day) and the world’s biggest creditor nation. Yet it has a health system that, in many ways, resembles that of a third world or developing nation. It is a world leader in many areas of healthcare technology, but its healthcare is available only to those with expensive insurance, i.e. the wealthy and middle class. Those at the bottom of the socio-economic scale miss out, as the COVID-19 pandemic is showing. India is the world’s biggest democracy on a population basis and has health and political systems that behave much like that of the US.

The US has a big gap between the very rich and the rest, and between the middle class and those at the bottom of the socio-economic ladder. India is the same.

Religion (Christianity) has a strong hold in the US and yet there is harsh racism directed at lower socioeconomic classes, many of whom are descendants of former slaves. India is the same, with Hinduism and the caste system. Furthermore, both the US and India display an irreligious prejudice to those of the Muslim faith.

US politics, at both Legislative and Executive branches and at federal and state levels, are deeply polarised by seemingly irreparable partisan divisions. At its political head is a populist who exploits public fear and ignorance to build popular support and who revels in the media spotlight. India is the same.

COVID-19 has shown that the US and India have too much bureaucracy and no communication or co-operation between federal and state government levels.

The President of the US wants to move the country towards self-sufficiency in terms of its global political and trade relationships. India is the same.

The US relies on the world’s investors to fund its federal budget deficits and years of profligate government spending. India is similar although the numbers are smaller.

The various arms of the US federal and state governments and its public service have not been united in fighting the COVID-19 pandemic. Consequently, the US now has the greatest number of COVID-19 related deaths, is experiencing an economic fallout that is unfolding at an unprecedented pace and extent and, in many circles, is debating the wisdom of going it alone in a bid to ‘make America great’.

A majority of Americans would be appalled to consider themselves as having more in common with India than with other industrialised nations. India has four times the population of the US in a third of the land mass. Let’s hope that India does not go down the same deadly COVID-19 path as the US.

Be careful what you wish for, Mr Trump

US President, Donald Trump, has become another in a long line of US Presidents to push the US towards isolationism. In his Farewell Speech, the first US President, George Washington, warned against “entanglements” against other nations and permanent foreign alliances. Washington was warning against Europe. Trump has specifically targeted China although he has also roiled against Europe, Japan, Canada and Mexico, among others, which hints strongly that he desires full US isolationism from the world.

Be careful what you wish for Mr Trump. Successful US isolationism might look fine from inside the US bubble but it looks very different from the outside looking in. The US would be alone in the world. Yet, the US has never been fully self-supporting and is even less likely to be so now.

Lionel Shriver’s 2016 novel, The Mandibles, depicts the descent of the US from superpower to global pariah that results in the destruction of all the US’ social, health, fiscal, economic and financial structures. The trigger in the novel is the US’ insistence of its right for the world to eternally buy its ever-growing, massive debt at favourable interest rates to fund its ballooning budget deficits at affordable costs. There is no explicit suggestion in Shriver’s novel of the US adopting isolationist policies. It does not take much to imagine the world very quickly losing its desire to fund the US’ fiscal excesses if the US decides to go it alone.

We are seeing worrying signs of Donald Trump’s desire to put America first in the battle against COVID-19 with little or no regard for the welfare of and the US’ long term relationships (trade and fiscal) with those outside the US. Trump and the US might win some external battles in the fight against COVID-19 but Trump could lose his isolationist war that would result in the US not being “Great’ but becoming insignificant.