One of the most interesting notes to emerge from the latest IMF outlook report on the expected auspicious performance of the global economy this year was not in the report or in the chronicles detailed in the announcements this week. It is obvious. The agency’s figures exposed nothing other than consolidation in the post-pandemic era of a G2 between the US and China, forced to share the global vertex.
This is how the world will be from now on. The rest of the planet will depend on the level of coordination and stress management between these two unique players that repel each other.
That society, which will be very different from what we have seen so far, is based on basic numbers. The US will grow 6.4% this year, far exceeding the 3.5% contraction suffered in 2020, in the midst of the pandemic. On the other hand, China will expand 8.4% without having recorded losses last year when it grew 2.3%. It is almost 11% of aggregate wealth if the periods are added.
The answer in both cases has been a huge public investment to escape the jam of the crisis associated with the disease. The same gigantic formula tested after the economic tsunami of 2008.
The Joe Biden administration has just launched a $ 1.9 trillion stimulus plan that, added to the bailouts during the Donald Trump era and the $ 900 billion one promoted by Democrats last December, rounds up to 5 trillion. In that number he explains the support that the markets maintain towards Biden. Equals a little less than a quarter of the US GDP of some 22 trillion dollars, the highest in the world.
Five trillion dollars is also the difference in favor of the United States compared to Chinese GDP, a distance that will be reduced in the last half of the decade. when the two powers will have the same economic dimension, if one of the two rivals fails to prevent the development of the other.
This rain of tax money configures “An experiment that has no parallels since the Second War” The Economist recently pointed out. For this energetic liberal milieu, the good news is overshadowed by “The danger for the US and the world of the economy overheating” and shoot inflation and rate hikes. The IMF, far from these concerns, remarked in a celebratory tone that the sails in the US wind are due to these extraordinary stimuli.
Vladimir Putin, the Russian president with Xi Jinping, has never before had such a strong bond between these two countries Reuters
About China he repeated the same words. The Asian giant recovered a level of pre-pandemic growth “what many others (in the global north, not to mention the south) they will not achieve before 2023 ” due to “an energetic response in public investment and the support of the Central Bank.”
This impulse in each of its paths, the two capitalists beyond the formats, maintains China and reinstates the United States as the two locomotives of the world economy. Especially North America whose structure is still superior to that of its Asian rival. The OECD, a club of rich nations, predicts that the US, among the world’s largest economies, will be by the end of 2022 even bigger than predicted before the pandemic.
That economic power is verified in political power. There is not one without the other, and especially without the first before the second. That’s why Biden, after those pandemic bailouts, is proposing equally extraordinary spending to boost US development and strengthen his rivalry with China. A central axis, the technological area.
The plan includes investments that will span eight years and will be financed with an increase in corporate income tax to 28 percent from the current 21%. Until The Economist agrees with that measure. At that point, the head of Economy in Biden’s cabinet, Yanet Yellen, proposed that taxes be standardized around the globe to cease competition with tax benefits and attract capital. If given, it would be a small sample of the coordination that emerged in the second postwar period, then with the gold standard.
This fight for economic development and political influence between the giants may be good news for the rest of the world because it would accelerate the speed of global growth. It is what the Fund has been pleading throughout the Trump era and repeats even now as a mantra regarding the need to defuse tensions between the two largest planetary economies.
That dynamism will be verified, by the way, if the spectra that the British magazine indicates ominously are not embodied The Economist. A rate hike, if it were necessary to contain an eventual inflationary surge, would further strangle the countries of the world south. “Emerging markets with large deficits, like Brazil, or with large debts denominated in dollars, such as Argentina, they have reason to fear the tightening of world financial conditions after a change in US monetary policy, “he said in an article under the title of” The big bet “, that of Biden, with its rain of dollars.
This G2 of royal power is transcendent because it anticipates a crucial transformation in global geopolitical design. China and the US fly over almost the same conflicts in similar scenarios and with similar impetus to become the world regulator. The incipient management initiated this past Tuesday in Vienna by Washington to try to rescue the 2015 nuclear agreement with Iran, is reflected in that panorama, and constitutes an example of what we indicated.
The new summit in Viene, with Iran and the US in indirect talks represented by Europeans. Reuters photo
There are a handful of reasons why the Biden administration launched into such a complex attempt amid the current global crisis that would impose other priorities. One of them is the finding that the Persian power, which had frozen its atomic structure in the 2015 agreement with the United States. resumed it with greater dynamism after Trump unilaterally deactivated that historic pact.
Iran, thus, has come to enrich uranium up to 20%, a scale that the jump to the 90% required for a bomb makes imminent. It is estimated that in four months Tehran would have its first pack of nuclear devices. China has stopped doing, and has just signed a plan to aid Iran for US $ 400 billion in infrastructure in exchange for a quarter of a century of continuous supply of oil and gas.
In other words, the Vienna pact that Barack Obama carried out with Iran, placed the Persian power under Western influence, amplified by the flood of investments that began to move in particular from Europe. Trump’s strategy, on the other hand, lled Iran to embrace China that consolidated its Asian projection and in the Middle East.
Within the G2 these chess games are predictable. China and its close Russian ally sympathize with the US approach to Iran. They do not rival Washington on these chapters, nor on climate change or the zero-sum conflict appeasement initiative. But the case of Iran is especially important because implies the rewriting of the North American agenda in the region, a fact that interests everyone.
Trump flipped the Vienna agreement attentive to the demand from Israel and Saudi Arabia who were looking for a tool to curtail or strike down the growing Iranian influence, gigantic after the turn in its favor of the war in Syria. But today Biden has put limits on the “carnal” bond that his Republican predecessor maintained with those countries, especially with the crown of Riyadh.
The rapprochement with Iran thus has a broader dimension than the object that motivates it. Israel is aware of this and in this observation the reason for the attack that launched in the last hours to an Iranian ship supposedly spy, in the Red Sea. A dangerous sign of the rejection of the new world that the White House brings.
Fact sheet on the AFP uranium enrichment technique
It is possible to guess another reed in these movements. European (and North American) corporations want to resume business in Iran and compete hand-in-hand with China. The Peugeot automaker was never able to recover some $ 450 million that was left in the Islamic Republic due to sanctioning pressure from Trump against any negotiations with the regime.
The powerful French oil company Total still has $ 50 million dead. And so a large number of first-line companies that started businesses in airports, aircraft fleet, services and infrastructure and had to cancel them. The EU has managed intensively during these years so that the negotiating relationship with Iran is restored. The US is now associated with that interest, part of the strategy to regain the alliance with the Continent that the Republican disrupted by opening a vacuum that China occupied.
A minor but illustrative piece of information about these stunts involves South Korea. Seoul owes Tehran $ 7 billion for oil purchases. The blockade due to sanctions prevents paying off that debt. Recall that at the beginning of this year, Tehran confiscated a tanker from the Asian country in the Persian Gulf.
Now the website of the NPR (National Public Radio of the USA) quoted an academic who pointed out that if South Korea in principle hands over a billion of that debt to Iran, this time the White House will look the other way. In exchange for these gestures, the US needs to re-freeze the nuclear program. China is a paradoxical partner for the same goal, and a decisive influence along with Russia on the Iranian theocracy. The G2.
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