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- [00:00]
John Van Reenen
Let me tell you something.
- [00:03]
Sue Windebank
The United States of America is the most powerful nation on Earth.
- [00:08]
Donald Trump
Period. Period. Not only do we have the largest economy in the world, we have the strongest economy in the world. We have the most productive workers in the world. Together, we will make America strong again. We will make America wealthy again. We will make America proud again. We will make America safe again. And yes, together, we will make America great again.
- [00:46]
Sue Windebank
Welcome to lseiq, the podcast where we ask social scientists and other experts to answer one intelligent question. I'm Sue Windebank from the IQ Team, where we work with academics to bring you their latest research and ideas and talk to people affected by the issues we explore. A shining city on a hill. America the Beautiful. The United States has long been mythologized as the land of dreams and opportunity. And since the fall of the Soviet Union in the 1990s, it has been undisputedly the most powerful nation on earth. But is it a fading force? The idea of an America in decline has gained traction in recent years and has, of course, been capitalized on by President Trump. Is America's greatness under threat? This episode, we're doing something slightly different and teaming up with the Ballpark, a podcast produced by the LSE Balin United States center, which focuses on the politics and policy of the United States. I'm joined by Chris Gilson, managing editor of usapp, the Phalen US Center's daily blog, who also presents the Ballpark podcast.
- [01:58]
In this episode, we'll be asking, will the US Remain the world superpower? We'll hear what makes the US Economy so productive and what role the US has played in making its geopolitical rival China the huge economic success it is today. And a former advisor to the US Government will tell us which nations might rival US Power in the future.
- [02:17]
The United States remains the largest economy in the world. The IMF forecasts that US GDP will hit US$28.7 trillion in 2024. China, the world's second largest economy, is some way behind, with a predicted GDP of US$18.5 trillion. I spoke to Professor John Van Renan, the Ronald Coase Chair in Economics and the Director of the Program on Innovation and Diffusion at LSE and US center affiliate. I asked him what makes the US Economy such a success?
- [02:53]
John Van Reenen
Well, what does make the economy such as this? There's a lot of different factors. One obvious one is just the US Is a big country, so the advantage of having a large population and land mass is that you just get the advantage of scale. You Have a big demand, local demand for your products and your services. You can scale up to get economies of size. The size of the market can give you more competition, can incentivize businesses to work hard, harder, but be more innovative, get better products. So size is one advantage. Of course, many countries are big. Think of China, India, Russia even. What makes the US more unique, I think, is that you could just kind of describe it as openness. So the US has put a, I think correctly, historically, an emphasis on being open to ideas for people from other countries to come, a nation of immigrants. And this has enabled it to attract talented people from all over the world to come and work in the us, whether that's as entrepreneurs or in its universities or as business leaders. So that I think is one of the secrets of the US success is kind of openness to people, but also openness to new companies. So the ability to set up a new company and compete with some of the incumbents creates this dynamic of competition, sometimes called creative destruction. You can create more firms and destroy some old ideas and, you know, older incumbents, but that's that those forces actually are part of its success, enables it to grow more quickly, become more innovative and more productive.
- [04:46]
Sue Windebank
You've done work on firms and their productivity. What's the role of US economies in the US's economic success and what makes them so productive?
- [04:55]
John Van Reenen
So US companies have been successful multinationals around the world. So if we think of, say that in the digital space, if you think of some of the leading tech companies, they are predominantly American. Apple, Google, Microsoft, Nvidia, Facebook, these are all companies which started off in the us, but have spread around the world. What makes them so successful, I think is that, and I should say it's not just in the digital space, it's also in many of the kind of less high tech spaces as well. Think of retail, Walmart, Costco and so on, or car companies. So I think that one of the aspects is innovation. So there are these clusters of amazing high tech innovation in the us, where there's lots of startups and new businesses, obviously thinking of Silicon Valley, but also in Cambridge, Massachusetts have been going to biopharmaceutical cluster. And these clusters typically are around leading universities. So Stanford and Berkeley and Silicon Valley, or Harvard and MIT in Cambridge, Massachusetts. So that that kind of breeds this ecosystem. So you have top technical people, scientists together with venture capitalists, supplying the finance together with all the other things you need like intellectual property, lawyers and so on. So that kind of gets the buzz going and attracts people to Come there and then these companies have the ability to scale up very quickly. So one of the big market I mentioned earlier on enables the companies initially to scale up in the home market. But then once they've got those benef benefits of scale, they can then move into international markets as well.
- [06:54]
Sue Windebank
The US's size, openness and innovation have helped establish it as an economic powerhouse. These factors help give rise to superstar firms such as Google, Facebook, Apple and Netflix. John explains how these dominate the market, leaving little space for competitors.
- [07:13]
John Van Reenen
Many of these new industries are kind of intrinsically what we call winner take all type of industries. In other words, it's kind of success built, builds upon success. So if you think about search that Google has, you know, people want to, you know, use the best search engine. So how do you get the best search engine? Well, if lots of people are using your search engine, a company like Google can get more information on them and help improve the algorithms which direct their search. So the more people want to use them, so you get this kind of chicken and egg type of thing where you get what economists call network effects, which actually mean that you become the dominant search engine. It's very hard for other search engines to come in, even if they're very well financed like Bing by Microsoft to kind of overtake them.
- [08:00]
Sue Windebank
Along with having the world's most dynamic economy, the US also has the most powerful military in the world and is often referred to by media and academic commentators as the world's policeman. The US took on this role after the Second World War when it undertook to fight communism and then later terror in the early 2000s. But there have been shifts in US foreign policy suggesting a declining desire to be the world's cop. To get a better understanding of the U.S. s role in maintaining the global order, I spoke to Dr. Ashley Tellis, the Tata Chair for Strategic affairs and a Senior Fellow of the Carnegie Endowment for international peace. Dr. Tellis previously served as a senior advisor to the U.S. government. When U.S. forces withdrew from Afghanistan in 2022, President Biden said it was the end of an era of major military operations to remake other countries. What would you say is behind the shift and what does it actually mean in terms of the US being the world's policeman?
- [08:54]
Ashley Tellis
I think the exit from Afghanistan was a response to the weariness that the United States felt over a 20 year period with the global war on terrorism. It proved to be an extremely expensive campaign. And what was most unfortunate about it was that for all the expenses in blood and treasure, the US was gradually grappling with the reality that it was unable to fundamentally change the outcomes in those countries. Now we of course succeeded in overthrowing Saddam Hussein in Iraq, and that was a tactical victory. But the strategic objective of creating an Iraq that was stable and friendly to the west is still proving to be a continuing challenge. In Afghanistan, of course, we overthrew the Taliban regime, but after close to two decades of efforts, we've ended with the Taliban regime back in power. So I think what President Biden meant when he said, what he said was that the United States was no longer going to be in the nation building business. The United States has exited nation building, but it has not exited order maintaining in the international system. And I expect that as a hegemonic power, the US will continue to remain involved in order maintaining. Now what does that mean in practice? In practice it means that the United States will pay attention to checkmating aggression by other states, but it will no longer make extraordinary efforts to remake their societies. And that is a very important distinction.
- [11:05]
Sue Windebank
To what extent does the American public have an appetite for foreign intervention now?
- [11:10]
Ashley Tellis
So the appetite of the American public for foreign interventions today is close to zero. But there is an important caveat. It all depends on what US interests are implicated in the intervention. If there is a threat to US interests, if there is a threat to US security, I think the United States public will rouse itself and support decisions for intervention.
- [11:46]
Sue Windebank
While the attitudes of US politicians, policymakers and the public have changed towards military intervention overseas, the US stands by to act when either it or its interests are threatened and it has the power to do so. The current global military and economic dominance of the United States remains. But might that change? I asked John Van Reinen what might threaten the US's economic supremacy.
- [12:12]
John Van Reenen
So I think that many of these parties, both Donald Trump, but you also see this in many other countries around the world, want to put up barriers which will reduce competition, reduce openness, reduce the spread of ideas, become inward looking. That's generally bad for both economic developments and also for civil society and democracy. So China now in terms of its overall economic size rivals the us. And in some sense China, it, it's not necessarily a failing. I mean it's, you know, the, the great news of the last 30 years has been the way in which, you know, the growth of China as it became more open after its reforms on the Deng Xiaoping, you know, increased the world material well being of, you know, billions of people within China. And increasingly that's happened around the world. India is another example. So you know, the catch up which has happened is from a kind of global poverty point of view, a good thing, lifting people out of poverty. But the government of China is now a strategic rival towards the us and it's a communist dictatorship. It's a kind of capitalist economy, but with a communist policy. And the Chinese government certainly will not play the pro democratic role that the US has generally played.
- [13:48]
Sue Windebank
China's economic rise in recent decades has been phenomenal. Transforming itself into a source of cheap labor and establishing itself as the world's largest exporter of manufactured goods. To get some insights into China's rise and the U.S. s role in it, I spoke to Dr. Elizabeth Engelson from LSE's Department of International History and a U.S. center affiliate who has just published her book Made in China. When US China Interests Converged to Transform Global Trade. She explained the US's role in helping to create the current global dominance of Chinese manufacturing and its own deindustrialization.
- [14:21]
Elizabeth Engelson
Even before Deng Xiaoping, Chinese policymakers in the latter years of the Cultural Revolution began to experiment with ways of bringing China's industrial capacity into line with or in sort of conjunction with the global capitalist system. And this is during still Mao's rule. Right. And so this was a really striking thing that I was beginning to learn about. But as I continued to dig, I also saw that crucial to this convergence, what was happening within China were also changes happening within the United States. And I wanted to really disaggregate where those changes came from. And they came from US corporations and business people. They came from an increase towards outsourced manufacturing. But the capacity for these corporations and these business people to do that, to turn to offshore manufacturing, to turn to cheap labor overseas, was enabled by legislation and policy coming in particular from Congress, but also from the Executive branch that not only supported but encouraged this movement towards offshore manufacturing. So in Congress there was a particularly important trade act, the Trade act of 1974, which introduced incentives for low cost labor in developing nations to provide nodes of production. And similarly at the executive level, what was particularly striking were assumptions by US policymakers that they could use trade or use the trade relationship to incentivize and assist larger geopolitical and diplomatic negotiations.
- [16:04]
Sue Windebank
So was the US blindsided by the impact that such extensive trade with China would have on its own domestic industry?
- [16:12]
Elizabeth Engelson
So it depends on who within the United States you look at. Policymakers and economists today will often speak in terms of the surprise that they feel of China's economic success, its boom. There's a real sense of how did we get here and among some policymakers even, how did we let this happen? How could we let this happen? And this is, to a degree, reflecting a series of larger, I think, political and diplomatic assumptions. The first one is that the United States could have such a large impact or such an essential impact on what happens within China, because one of the most important things to keep in mind is that China, China's convergence with global capitalism necessitated a capitalism that changed. But those changes that were happening were not designed to help China. They were designed to help the capitalists within the United States. Right. And so when we think about this idea of being blindsided, it's less to do with not having seen the consequences of China's industrialization and more to do with not listening to those who, Even in the 1970s at the time, did see the larger repercussions of assisting China's turn to cheap manufacturing as a key component of its industrialization and development policies. And it's as early as this 1970s period that you have organized labor and workers really protesting and lobbying people in Congress and at the executive level, in fact, and saying that the impact of what you are encouraging may well be a loss and a continued loss of jobs. And this was in a context when textile workers, those in the auto industry, those in the steel industry, were already facing the loss of industrial jobs due to other parts of the world. And so it was this fear that China was entering into that larger dynamic, but because of its size and because of the number of people that it would be exacerbating and already existing process.
- [18:26]
Sue Windebank
That was developing post Covid, concerns about the disruption of supply chains have grown, and some companies have begun to move manufacturing away from China, a process known as reshoring. Alongside this, national security anxieties have led to President Biden aiming to boost domestic research and the manufacturing of semiconductors in the US through the CHIPS and Science Act. Semiconductors are an essential component for communications, computing, healthcare, military systems, and more. One of the aims of the CHIPS act is to create jobs domestically. I asked Elizabeth if she thought it would be successful.
- [19:01]
Elizabeth Engelson
So it's a really good example of a rhetorical combination of geopolitical interests and domestic worker interests. Right. But I think what's really, really important is to remember that industrialization or that the creation of industrial output is not something that the United States has had a particular dip in since the 1940s. In fact, the United States industrial capacity has remained fairly steady since the sort of World War II era. Right. It's going on almost, you know, almost a century. So industrial Output remains fairly steady. What has changed over time is industrial employment. So when we speak of de industrialization, it's really a process of manufacturing job losses rather than the sort of the ending of or decreasing of manufacturing itself. And so to speak about manufacturing jobs as coming en masse from the CHIPS act is misleading because it's a misleading understanding of how industrial policy works in today's context. These are high level, high tech, using sort of manufacturing outputs that will not create the kinds of jobs that the United States did have in the sort of mid century century era. And so while having the CHIPS act might help with geopolitics, it might help with the economy more more broadly. It's not going to address the needs of American workers.
- [20:37]
Sue Windebank
How likely would you say is it that China will overtake the US as the largest economy in the world?
- [20:42]
Elizabeth Engelson
So I think when we speak about sort of the future of Chinese economy, at the core of it, at least today, is I think, a paradox because on the one hand the Chinese economy is stagn got significant problems with the housing market and with with a whole range of sort of capacity to buy and sell in the property market. But on the other hand you have a really strong Chinese economy in terms of electric vehicle production, in terms of solar panels and green energy production. And those two things operate together. This is the paradox of the Chinese economy today. If we're going to accept that this paradox exists, that China is both a strong economy in some ways and weaker in others, then it enables a way to adapt to change and adapt to historic forces that will happen that can't be predicted and therefore won't straight jacket U.S. policymaking. And there's a real long history, I think, in the United States of having a very straight jacketed approach towards China.
- [21:52]
Sue Windebank
In particular in terms of policy making. I asked Ashley Tallis what he thought the US had got right in its dealings with China. Here he mentions his 2015 book, Revising Us Grand Strategy Towards China, written with co author Robert Blackwell.
- [22:06]
Ashley Tellis
And until the point that our report appeared, most US policymakers were content to believe that a continuing engagement with China would change Beijing's attitude to the world and that we would basically be able to live with a high degree of amity without any need for correction. And Blackwell and I made the argument that that was certainly not going to be the case. And so the first thing that US policy has gotten right since then was it has begun to think of China as a competitor. The second thing that we've gotten right is that we need to have a much bigger toolkit for dealing with China as a competitor than just simply engagement and the hopes that accompanied engagement. And so I think China, we have begun to do many things since then that are very sensible and long overdue. And let me just identify three elements that I think are worth thinking about. The first is the US has now doubled down on investing in protecting its military primacy in the region. And that was necessary because Chinese military modernization has cut into US Military advantages and has made our ability to protect our allies in the Indo Pacific much harder than it once was. And so the US Decision to double down on military investments is a very sound one and a correct. Second, the United States has really doubled down on revamping its export controls because it wants to make certain that China simply does not have easy access to cutting edge strategic and dual use technologies which can be used to build up a military machine that will eventually confront us. So I think that's the second thing we've gotten right. And the third thing that we've gotten right is the recognition that the United States cannot simply challenge or confront China alone. It needs partners to do that. And so the United States has now doubled down on intensifying its partnerships with its traditional allies like Japan and Australia in the Indo Pacific, with new partners such as India, and even with old partners in Europe like the uk, like France, like Germany, countries that have a stake in the outcomes in Asia.
- [25:03]
Sue Windebank
How concerned should the US Be about China's relationship with Russia at the moment?
- [25:07]
Ashley Tellis
I think it should be very concerned because for reasons that are completely understandable, both the Russians and the Chinese see the United States as their single biggest geopolitical threat. And because they see the United States in common as their single biggest geopolitical threat. Their partnership against the United States is going to remain durable and it is likely to intensify for a long time to come. China can bring resources and Russia can bring disruptive technologies. And if those two assets are married, the Chinese Russian alliance can cause the United States a great deal of trouble. It's already doing so, and it could get a lot worse in the future.
- [26:01]
Sue Windebank
India has one of the world's fastest growing economies and a large young population. How far does India have to go to become one of the world's superpowers?
- [26:09]
Ashley Tellis
So India, as you pointed out, has enormous resources, but these resources are, at the moment what I would call potential resources. So it has a young labor force. It is beginning to create the foundations for a very aspirational society. It has relatively high rates of saving, and it is increasingly desirous of being connected to the world. It also has a remarkably ingenious service industry and it is extremely creative when it comes to the use of science and technology for purposes of creating innovative sensors in the global economy. So the foundations for its geopolitical ascendancy are in place. But I would argue that India still has a long ways to go. India still has to find the magic formula of how to utilize these resources most efficiently in order to increase its rate of growth. Now, India has done quite well in the last 20 or 30 years. It has grown roughly at somewhere between 5 to 6% consistently, and in a few years it has even exceeded 8% growth. In other words, India has demonstrated peak growth rates of about 8%. But if India is to become a great power like China is today, then I think it has to be able to make the peak growth rate of 8% or more into a new trend growth rate. In other words, it cannot afford to do 8% plus growth episodically. It's got to do 8% plus growth consistently. And it has to do that for at least another 20 years. I'm not convinced that Indian policy today will allow it to reach such trend growth rates consistently.
- [28:43]
Sue Windebank
With China's economy stagnating in some respects and India still some way from fulfilling its potential, I asked Ashley Tallis whether it was likely the US Would remain the world superpower.
- [28:53]
Ashley Tellis
I think we are fated to remain the world's superpower for at least another couple of decades. I think China will continue to rise. I'm not one of those who believes that China has peaked in some meaningful sense. When I look out at the geopolitical terrain globally, I cannot imagine any other bloc that is either coalescing currently or likely to coalesce in the future that will pose a meaningful threat to American hijab. The European Union could in theory, if the European Union becomes more akin to a state. But the European Union is an experiment. It's a work in progress. And while it is acquiring state like characteristics, it is still not a unified state and is unlikely to be for reasons that we all appreciate. But the more important thing is that the European Union, even if it were to become state like, would be composed of constituents, most of whom are alliance partners of the United States. And if you exclude the European Union, then all the other coalitions that are out there, the brics, the Shanghai Cooperation Organization, the Unlimited alliance between Russia and China, or even the New Quartet in an axis of resistance. Russia, China, Iran and North Korea, to my mind, are just not strong enough. Collectively to challenge American hegemony. And so the field is open. I think American geopolitical dominance at the core of the global system will be a reality for at least several more decades to come.
- [31:01]
Sue Windebank
I asked John Van Reenen the same question. Will the US remain the world's superpower and does it matter anyway?
- [31:09]
John Van Reenen
Well, let me ask the second question first. I think it does matter because with all its problems, the US is the only, I think, country which has the hard power and soft power to provide the underpinnings for the rules based global order. I think it will and it has, because of all the incredible strengths it has in terms of size, in terms of openness, in terms of competition, in terms of innovation, it will remain a very powerful player. I think if it starts looking inward, becomes very isolationist, this will kind of weaken it economically, certainly politically. And there will be other. I mean, unless there's a huge change, I think China will be a strategic rival India later. And my fundamental feeling is that without that degree of freedom and democracy that we enjoy in many, many countries, that ultimately is going to be something which hurts China's ability to grow and innovate. But you know, there's counter arguments, you know, in the world of AI, data counts a lot. And China has a lot of data and doesn't care about privacy. So that gives China a big advantage in terms of using big data sets and developing algorithms. So I think we in the west have to think about how we use those resources and the data resources we have in order to. Obviously we have more concerns over privacy, but we have to find ways of protecting people, but also exploiting the data that we have in order to enable us to compete in these new technologies of the future.
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Sue Windebank
For John, the rivalry between the US and China will be partly characterized by the ability to innovate and attitudes towards the use of personal data. But for historian Elizabeth Inglson, given the importance of another global challenge, it might be time to move on from ideas of competition and supremacy.
- [33:13]
Elizabeth Engelson
The more I've been thinking that, I think it's actually the wrong question to be asking in today's context, because it's not. We're living in a world where the rise and fall of great powers has always been at the forefront of some policymakers, you know, throughout history, right. Like how can we maintain our dominance in the world? But we're living in today's context in a world in which the biggest challenge that we all face is a climate crisis. And I actually think that the biggest question, therefore we need to consider is not who is going to be the world's superpower, but how do we respond to the climate crisis? Because that is fundamentally changing, I think the nature of global order in ways that we're not keeping up with, in ways that are going to necessitate a new vocabulary, they're going to necessitate a new understanding of international order, a new understanding of what geopolitics looks like. And so to ask which country is going to be the geo, you know, the next superpower is a very sort of 19th century and 20th century question. I think the question for the 21st century needs to be very different. It needs to be how do we collectively deal with the biggest threat, the biggest existential threat that we as human beings face? And that is not about which, which country is the superpower. It's much bigger than that.
- [34:38]
Sue Windebank
This episode was produced by me, Sue Windybank and Chris Gilson and edited by Anderson Tan. If you'd like to find out more about the research in this episode, head to the Show Notes. And if you enjoy iq, please leave us a review. And don't forget to to check out the Phelan US Centre's podcast, the Ballpark. We're taking a break for the summer, but we'll be back in September with a new season of lseiq.