The end of the system of the world
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The key thing to understand about this decoupling, I think, and the reason it’s for real, is that this is something the leaders of both the U.S. and China want. No matter what you heard in 2018, this is not a case of a protectionist U.S. trying to defend its manufacturing industries while China becomes the champion of globalism. The U.S. is acting not out of concern for its industries — indeed, its chip industry will take a huge hit from export controls — but because of how it perceives its own national security. And China’s leaders want to shift to indigenous industry, regulated industry, and even nationalized industry, even if that shift makes China grow more slowly. The decoupling between China and the developed democracies, so long a topic of conversation and speculation, now appears to be a reality. A critical point has been reached. The old world-economic system of Chimerica is being swept away, and something new will take its place.
- In fact, whether the non-China blog coordinates on policy is really the big question regarding the new world-economic order. Together, the U.S., Europe, and the rich democracies of East Asia comprise a manufacturing bloc that can match China’s output and a technological bloc that can exceed China’s capabilities. With the vast populations of India and other friendly developing countries on their side, they can create a trading and production bloc that will be almost as efficient as the old Chimerica system. But this will take coordination and trust on economic policy that has been notably absent so far. The U.S. will have to put aside its worries about competition with Japan, Korea, Germany or Taiwan — and vice versa.