STILL UNCLE SAM CALLS THE SHOTS

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The US has lost the title of the world's largest economy to China, according to the IMF

First things first. China is not about to replace the US as the world’s superpower. Rather, what is happening is that the middle of the second decade of the Third Millenium is a metamorphic era as evidenced by a shift in geopolitics at both ends of the Eurasian land mass: from the Greek bailout, David Cameron’s bid to de-Euronise Britain, Putin becoming the most powerful man on the planet to China making galloping inroads towards the United States’ revered crown of being the largest economy on the planet.

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China’s model of economic development, initiated in the early 1970s by Deng Xiaoping, has brought huge success to the country in the last few decades.

China entered the year 2015 as the world’s largest economy (depending on which journal or international financial body you buy into) but it will take time before they assert themselves as the leaders like Britain once did. The reasons for this may be well expressed by the Bernankes and Lagardes and Keyneses of this world but my layman economics tells me that China’s low per capita income and large population of poor people way heavily on it laying such claim and hence its reluctance to lobby for more world power at US-led bodies like World Bank and instead going for a regional bank AIIB to consolidate its position. If its economy happens to stall in the near future, as trends have been pointing of late, China’s superiority at the mean time will remain to be a momentary seismic orgasm and this is evidenced by the calculative Japanese’s reluctance to join the founding fathers, but rather preferring to watch from the byline and wait to hitch a ride if the tides of economy will dance to the tune of Jinping’s troops.

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China will overtake the US sometime in the next decade. But it can never replace it. Therein lies the danger. The US will no longer have the capacity to uphold the global order, while China will always lack the legitimacy.

Who contributes more to global growth, China or the United States? Using PPP it’s China. But remember much as PPP is the most acknowledged standard measure at the Economist and IMF, the cost of a cup of tea in Kakamega does not march with a cup of tea in London, exchange rates aside just like machinery, plant and equipment won’t be as in much demand in labour-intensive economies like they are in capital-intensive economies washing out the desired effect of PPP considerably.

But using market rates, the United States wins out. The US has positioned itself strategically over the years and much has China has worked its up the top to supplant Uncle Sam, overall, The US businesses in the world aggregate for higher GDP generation using adjusted Exchange Rates. I think the IMF has standardised this practice to giving the fancy name the Big Mac Exchange Rate System.

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But the concept has steep limitations too. China can’t buy missiles and ships and Iphones and German cars in PPP currency. They have to pay at prevailing exchange rates. That’s why exchange rate valuations are seen as more important when comparing the power of nations.

So until China outrightly usurps The US in all respects economic-wise, we can continue enjoying the Kardashians and that lady Caitlyn Jenner continue breaking the Internet with unrivaled folly.

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China is an autocracy that is not built on immigration and has never sought to project universal values.

Chad Bironga Makori is a student of Economics and Statistics at the University of Nairobi

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One thought on “STILL UNCLE SAM CALLS THE SHOTS

  1. China is giving Uncle Sam a run for their money from left right and center. In fact, in terms of PPP, it usurped the US long ago, around the turn of the New Millennium if am not wrong. Many has been said about this new battle for supremacy but this is my two pennys’ worth. The US is most certainly suffering from the Supremacy complex. Therefore any other nation that tires to assert itself in any sphere is most definitely viewed askance. But Uncle Sam has seriously underestimated the potency of China’s soft power. No country wants foreign meddling in their domestic affairs any longer. And this is where China wins a jackpot. Unless America’s foreign policy changes face, the China threat is not only real but an already happened event. Again, the multilateral development bank AIIB is another area that Mr Jinping has scored. Managing to get countries like Britain and France to sign up as founding members goes a long way into showing just how much of a threat China is to the US.

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