Bloomberg Businessweek - USA (2020-11-16)

a licensebeforesellingcertaintechnologiesto

China,andattemptedtoforcethebreakupof

a majorChineseinternetcompany.

Inotherwords,thefearofChina’srisehas

already begun to turn the U.S. away from

free-marketprinciples.

It would beeasytodismissthoseshiftsas

idiosyncrasiesoftheTrumpadministration.

Therealityis thattherise ofstate-centered

economies,pursuingmercantilist tradepol-

icies anda free-riderapproachto acquiring

intellectualproperty,makesthefree-market

systemlooklesslikethebestapproachtodriv-

inggrowthandmorelikea fasttracktogiving

awaycompetitiveadvantageand—ultimately—

geopoliticalpower.NotjusttheU.S.butalso

EuropeandadvancedAsianeconomiesfacea

toughchoicebetweenopennessanddynamism

ontheonehandandprotectingcoretechnolo-

giesandnationalsecurityontheother.

A similartrendis evidentinpolitics.A combi-

nationofBloombergEconomics’GDPforecasts

andFreedomHouse’sclassificationsshows

60

BloombergBusinessweek November16, 2020

significant. As India’s rise challenges

China’s status as Asian hegemon, it can

only increase.

THE STATE STRIKES BACK

For the past 40 years, with the Reagan and

Thatcherrevolutionsas thespark,the free-

market ideal has been the organizingprinci-

ple of the global economy. In the next 30 years,

the balance between the market and thestateis

settochange,witheconomies

thatoperatewitha highdegree

ofstateownershipandcontrol

intheascendancy.

Combining Bloomberg

Economics’ long-term GDP

forecasts and the Heritage

Foundation’sclassificationsys-

tem,theshareofglobaloutput

coming from economiesthat

are“free”or“mostlyfree”is set

toslidefrom57%in 2000 to33%

in2050.Conversely,theshare

fromthoseclassedas“mostly

unfree”—economieswitha high

degreeofstatecontrol—issetto

risefrom12%to43%.

It is, of course, possible

that state-dominated econo-

mies will reform, transition-

ingtoward a greater role for

the market. Possible, but far from guaran-

teed.Indiais liberalizing;Chinaisn’t.Indeed,

PresidentXiJinpinghascalledforstatecom-

paniesthatare“stronger,better,andbigger.”

For free-market economies, maintaining

thebenefitsofopennessanddynamisminthe

faceofcompetitionfromstate-centeredrivalsis

proving tough. Since 2016 the U.S. hasimposed

tariffs on hundreds of billions of dollars in

Chinese imports, signed a trade agreementthat

dictates what quantities of what goodsChina

should buy, required U.S. companiestoobtain

ASIARISING,U.S.ANDEUROPEFALLING

Top 10 nationsbyGDP,inrankorder

NorthAmerica Europe Asia SouthAmerica

U.S.

Germany

Japan

U.K.

France

Italy

Russia

Canada

Brazil

Spain

China

U.S.

India

Indonesia

Germany

Japan

Brazil

France

U.K.

Turkey

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

THE NEW ECONOMY

DATA: BLOOMBERG ECONOMICS