The combined American and European share of the world economy exceeded 50 per cent from the beginning of the 20th century right up till 2009, when it was 51 per cent. After that year it has been declining. It was 43 per cent last year and it will fall further. Europe is stagnating economically. The European Union’s combined GDP grew by less than 1 per cent last year and less than 1 per cent the year before that. It may grow at 1 per cent this year, but there are no long-term high growth prospects. The United Kingdom grew under 1 per cent in 2023, under 1 per cent in 2024 and might grow at 1 per cent this year.
America grew at 2 per cent last year and faces a recession this year, meaning a contraction in its economy. The people in the US, the UK, the European Union, Canada, Australia and New Zealand are together 10 per cent of the world’s population. Meaning that 90 per cent of the world had a smaller share of the economy than what is referred to as ‘the West’ till 2009. But this is changing quickly.
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And the rest of the world’s champion of change is of course China. Its share of global GDP was 1 per cent in 1990, 3 per cent in 2000, 9 per cent in 2010 and today it is 17 per cent. India’s was the same at China’s in 1990 and today it is 3.6 per cent (of a total global GDP of around 108 trillion dollars).
India has done reasonably well but the real engine of global growth for the last 30 years has been our neighbour. The spectacular and rapid rise of China has produced anxieties in ‘the West’, that is seeing its total dominance over the globe begin to slip. The Western media’s consistent attacks on China’s infrastructure projects in Africa and Latin America and South East Asia reveal this, along with yearly reports for the last 20 years that China’s economic success is soon about to end.
These anxieties are also revealing themselves in European politics and in the US. America’s love for Donald Trump is premised essentially on two issues. One is stopping immigration from non-white nations and deporting those already in the US, and the other is the desire to stop being ‘ripped-off’ by poorer nations that export goods to the US. Americans have a per capita GDP that is more than six times that of Mexicans and 30,000 dollars a year more than that of Canadians but they feel aggrieved.
This year, according to the International Monetary Fund, American per capita GDP is likely to be just short of $90,000. To put that in perspective, India’s is less than $3000 per person per year. The US is also at full employment, meaning that pretty much everyone who wants a job can find employment. By any measure, Americans are among the most successful and most privileged people in the world and yet they are angry over the rise of others. And the principal target is China. Trump wants to bring the jobs that Chinese are doing to the US, jobs, especially in manufacturing. In 1990, manufacturing’s share of the US economy was 16 per cent. Today it is 10 per cent. Manufacturing output rose from about $1 trillion in 1990 to $3 trillion today. So manufacturing grew, but at a slower pace than the rest of the economy. Jobs in manufacturing fell from about 18 million to about 12 million. So fewer American workers in manufacturing today produce more than 3 times what was produced in 1990. The reason is of course automation and efficiency. The US produces roughly the same amount of steel today as it did in 1990, about 80 million tons. The number of Americans hired in steel plants, however, has fallen from 512,000 in 1980 to 270,000 in 1990 to 70,000 last year.
An America that would take the jobs in manufacturing today being done in China to replace their workers in services and elsewhere would see a fall in economic output. People would be shifted from doing more productive work to less productive work.
And yet that is what is being attempted under Trump. This is being done in two ways. The first is blocking all competition. Chinese electric cars face 100 per cent tax when imported into the US, meaning they will cost twice as much. If an American would pay that tax they would still not be able to drive their Chinese car because of a ban on Chinese car software. The US Commerce Department says “cars have cameras, microphones, GPS tracking, and other technologies that are connected to the internet… and that the Commerce Department is taking a necessary step to safeguard US national security and protect Americans’ privacy by keeping foreign adversaries from manipulating these technologies to access sensitive or personal information.”
This ban serves the purpose of both protecting US firms and denying China. The second way is through universal tariffs and we will see what that means on 2 April when they are unveiled. This will affect the whole world, including US allies in Europe, Canada and Australia, who are bewildered because they thought themselves till this January as being partners of the US. The rise of the rest of the world has produced these fractures.
Will the US response ensure it does not slip further relative to the poorer nations? Of course not. China and India and Africa and Latin America will continue to grow. The dominance of the US and Europe and their influence will continue to decline, as they are forced to share power. What ‘the West’ could do 100 years ago, it no longer can. We have entered a new era in human history.
By Aakar Patel
