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The main trends in the world today

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Calixto V. Chikiamco

Introspective

The main trends in the world today

What are the main trends in the world today? What are the geopolitical forces driving change and impacting societies? What will shape the future?

In my mind, irrespective of the specific events that will happen in the future, these are the main trends or fundamental forces driving change :

1. THE US-CHINA RIVALRY
It’s official. The US considers China its strategic rival. The trade war that US President Donald Trump unleashed against China is but the opening salvo of what is probably going to be a long geopolitical clash between these two competing states.

It’s going to be similar to the Cold War between the Soviet Union and the US, but also different. It will be similar in the sense that this rivalry, as did the Cold War, will affect global and local politics. We have already seen how this rivalry affects Philippine foreign and economic policy. The return of the Balingiga bells, for example, can’t be considered as an act of wanton generosity by the US but as a deposit of goodwill to try to woo the Philippines back from its warming relations with China and cooling relations with the US under President Duterte.

The rivalry between China and the US will also be different from the Cold War because the nature of the conflict is different. For one thing, the Cold War was primarily ideological: communism vs. capitalism. For another, the Cold War was between two vastly different economic systems. However, today, both China and the US may be considered “frenemies,” both friends and enemies. Their economies are tied together. Witness how China’s economic slowdown has greatly affected the stock of Apple, which considers China its second-largest market for its iPhones.

While US President Trump may have unleashed a trade war with China, there is widespread bipartisan support in Washington for containing China. The Transpacific Partnership, which was initiated under President Obama, was actually meant to isolate and contain China, but US President Donald Trump dumped the idea and opted for a frontal trade war instead.




Witness, too, how the Republicans and the Democrats came together with a $113-million investment program that will invest in new technology, energy, and infrastructure projects in Asia as a counter-strategy to China’s “Belt and Road Initiative.” Republicans, usually adverse to foreign aid, also joined with Democrats to create a new foreign aid agency, the US International Finance Development Corporation, which will give financial support to US private companies doing business in developing countries. The intent is to provide countries like the Philippines an alternative to China financing under the latter’s “Belt and Road” initiative. The new Cold War between China and the US will last beyond the Trump Republican administration.

Analysts are saying that a “hot war” between the US and China may be inevitable, following the concept of the Thucydides Trap, first elaborated on by Harvard professor Graham Allison. The Thucydides Trap refers to an inevitable war between a prevailing power and a rising one, described by the ancient Greek historian, Thucydides: “It was the rise of Athens and the fear that this instilled in Sparta that made war inevitable.” Historians claim that of 16 instances of a prevailing power being threatened by a rising one, 12 have ended in war. (E.g. Carthage vs. Rome, Spain vs. England, Russia vs Japan, etc.)

Because of its strategic location, the Philippines is in the frontlines of the rivalry between China and the US. We can either exploit the rivalry or be collateral damage. In either case, the US-China rivalry is a main trend we cannot ignore.

2. DEMOGRAPHIC DECLINE
The saying “demography is destiny” is trite but true. There’s no escaping demographic forces. Singapore and China, which had implemented successful birth control programs, are now trying to move from population control in the opposite direction and failing. China, South Korea, Japan, and even Thailand, yes Thailand, are aging fast. This demographic decline will affect their respective economies.

world main trends

Japan, for example, where the population is shrinking (Japan’s population is foreseen to shrink from 127 million today to 85 million by the end of the century, and where the average age is 47, is being forced to revise its immigration policies if its xenophobic society wants to maintain its standard of living. Despite misgivings from the Japanese public, Prime Minister Abe recently liberalized its immigration policy, allowing for legal immigration and issuance of working visas in certain industries. Japan’s immediate problem is that industries cannot expand due to dearth of labor. Furthermore, Japanese agriculture is also suffering because the average age of Japanese farmers is 67 and six out of ten farmers are over the age of 65. Japanese agricultural policy will have to change as it has in “socialist” China, which has allowed land consolidation to increase efficiency and to solve the aging of its farming population.

Likewise, our ASEAN neighbor, Thailand, faces a huge problem, which would make it unlikely to escape the “middle income” trap. The average age of its population is 37.8 years (compared to the Philippines’ 23) and its working age population will shrink by 10% in 2040. Its population control program was too successful. Thailand will not only face the loss of labor-intensive industries but will also face the burden of financing its social security before it has become an advanced economy.

Therefore, because of the demographic winter in many countries, migration cannot be stopped. With migration, however, many societies will be disrupted with the arrival of new peoples bringing in their own values, culture, and traditions.

3. TECHNOLOGICAL DISRUPTION
Technological disruption is accelerating and will affect almost all industries and touch every aspect of daily life. Disruption will be severe because even established companies employing thousands of workers will see their business models disappear. GM and Ford, for example, will have to find a new business model other than selling cars if self-driving electric vehicles make it more attractive for commuters to just book rides rather than own cars. Those who make a living out of driving, such as truck drivers and delivery men, will find themselves useless to employers.

No industry is safe. Blockchain technology, for example, will disrupt and reorder the banking and insurance industry. Artificial intelligence will challenge the financial consultancy industry. Logistics, hotels and restaurants, retail, transportation, and telecommunications, to name a few, will be disrupted.

However, this broad-based technological disruption will also cause mass anxiety and political disruption. For example, economists Daron Acemoglu and Pascaul Restrepo in a paper on “Robots and Jobs: Evidence from US Labor Markets,” showed that the US Midwest and portions of the South that went for Trump had a far higher ratio of robots to population. Automation disproportionately affected blue collar white male workers in those counties, exactly the demographic which also disproportionately went for Trump.

Acemoglu and Restrepo only looked at industrial automation. Imagine what will happen when new, disruptive technologies like self-driving vehicles, artificial intelligence, and Internet of Things (IoT) are applied beyond factories to society at large. Or, imagine what will happen if artificial intelligence takes away even white collar jobs like those of financial advisers, lawyers, and accountants.

As a result of growing mass anxiety, we are already seeing that populism and autocrats offering simplistic solutions are on the rise. Disruptive politics is bound to strengthen and challenge the existing order.

In sum, the US-China rivalry, the Demographic Decline, and Technological Disruption are the main trends in the world today. These are the macro, irresistible forces that will shape our future.

 

Calixto V. Chikiamco is a board director of the Institute for Development and Econometric Analysis.

idea.introspectiv@gmail.com

www.idea.org.ph

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