Ashok Lavasa
About 400 years ago, a band of 104 pilgrims set foot in Plymouth near Boston, Massachusetts in an attempt to “change” their lives and seek a new future. In the process, they evolved into the United States of America, the world’s most powerful economy and arguably the most robust democracy. Once again, the people of that democracy seek “change” as they prepare to vote in the next few days.
On display in the democratic marketplace are two products; the one tried and tasted, the other on trial and yet to be tested. There are billboards exhorting people to vote in a democracy that doesn’t boast a very high voting percentage, although its influence on the entire world is extremely high.
In the US itself, there seems to be a growing concern about disproportionate growth in income levels of different groups based on their education. The household wealth for college graduates has increased by 95% since 1989 while remaining flat for non-college graduates. The average household wealth index when plotted from 1989 shows an increasing gap between those who went to college and those who only went to high school, as well as those who even had lower education. As of 2021, the average real wealth of those with a college background was US$1,832,000, compared with US$452,000 for those who had high school and US$185,000 for those who had no high school.
This is related to unemployment. Although official data doesn’t talk of an alarming level of unemployment, it is generally felt that the infusion of artificial intelligence in all spheres of business has created redundancies causing retrenchment and layoffs. The unemployment rate in September 2024 was 4.10%, marginally lower than the 4.20% in the previous month but much higher than the 3.80% in September 2023. The long-term average unemployment rate is around 5.69%, according to the Bureau of Labour Statistics.
There are other issues like inflation, immigration, and reproductive healthcare. But the sense that one gets is that people are undecided as yet about who is capable of bringing about “change” as former president Donald Trump and Vice President Kamala Harris are locked in a bitter battle. However, it is not only the Americans but peoples around the world who are waiting with bated breath for the outcome of the elections and its implications for other regions and the geopolitics of the world.
Middle East, Latin America
The Middle East has to be a priority of the next US administration given its share of 40% in global oil exports and its own reliance on the region for oil security. Besides, the Middle East plays a crucial role in balancing oil demand and supply globally. The issues of oil and regional security, the relationship between the US and Saudi Arabia, and the repercussions of the Israel-Gaza conflict on the region affect everyone. The concern seems to be the uncertainty in deciding who between Trump and Harris can impact the situation in the Middle East in a positive way, especially as dissatisfaction might grow if there is loss of territory in Gaza or the West Bank.
The other region that is likely to be impacted is Latin America, which has witnessed the growing influence of China. Earlier considered a preserve of the US, Latin America has seen the rapid growth of China’s influence in the last few years, led by its state firms investing in the region’s energy, infrastructure, and space industries. China now ranks as South America’s top trading partner with free trade agreements with Chile, Costa Rica, Ecuador, and Peru, and 21 Latin American countries signing up for China’s Belt and Road Initiative. China has invested about US$73 billion in Latin America’s raw materials sector, including by building refineries and processing plants in countries with significant amounts of coal, copper, natural gas, oil, and uranium. China has also invested in lithium production in Argentina, Bolivia, and Chile. Argentina, Brazil, Chile, Ecuador, Peru, and Uruguay are members of the China-backed Asian Infrastructure Investment Bank. China has financed projects in ports, airports, highways, and railways. What could be more worrying for the US is China’s concentration on building “new infrastructure” such as artificial intelligence, cloud computing, and 5G technology, and its strong bid to strengthen cooperation in the space sector. For Latin America, the major issue is immigration, which is clearly on the rise as witnessed by the number of people detained at the border.
According to Colombian journalist Diana Duran, the US administration needs to realize the importance of Latin America for the US economy. What is worrying for the US citizens is that while Trump sought to deal with the issue of illegal immigration by erecting a wall and asking Mexicans to pay for it, it was the US taxpayer that ended up footing the bill. The US administration’s war on drugs also affects Latin American countries, which may not be producers but serve as corridors for drug and human trafficking to the US.
Dealing with Russia
The question of US-Russia relations came up during the presidential debate in September. What seems to bother the US is that after the breakup of the Soviet Union, there was hope that the new Russia would be liberal, democratic and helpful to its neighbours. However, under President Vladimir Putin, the emergence of Russia as a country working to be a superpower has belied the US expectations, turning potential cooperation into a possible conflict.
While the US cannot ignore Russia, the latter seems unconcerned about the US elections. According to some experts, Harris is relatively unknown to Russians, although she is expected to continue President Joe Biden’s approach, while Trump is known to be a “friend” and is more preferred. Bob Woodward’s latest book War refers to many secret conversations between Trump and Putin, giving rise to apprehensions that Trump might make concessions to Russia. This may help Russia in dealing with the Ukrainian crisis, besides adding to its growing importance in influencing global economy because of its energy resources, which it has been able to leverage to consolidate its position with many Asian and European countries despite the sanctions against it.
Sino-US ties in spotlight
As far as China is concerned, it is believed that the US elections are being carefully studied by think tanks in Beijing because of the likely impact on trade, Taiwan and clean energy. With respect to trade, some in Beijing favour Trump over Harris but most think that the relationship will be determined by real economic considerations. The main issue would be tariffs, especially for Chinese tech companies that might be subjected to a differential regime.
The enormous dependence of the US on Chinese imports has led to substantial trade deficits. Needless to say, while both countries have a relationship of economic interdependence, the US has depended a lot on China as a destination for its foreign direct investments. One US priority is the diversification of its supply chains. As far as Taiwan is concerned, neither Harris nor Trump is likely to change the current US position. Further, there is a growing realization in the US that the need to move to clean energy gives advantage to China given its dominance in manufacturing of equipment and control over critical materials.
Top issue: climate change
That brings us to the one area that may see the most visible impact of the US election results – the global effort to combat climate change, given the diverse positions of the principal contenders and their parties. While there is a recognition to find an answer to the energy hunger in Asia and Africa, it is abundantly clear that their known differences are bound to affect global determination and collaboration in achieving energy sufficiency as well as energy transition. During the presidential debate, Harris dwelt on the threat that climate change poses and referred to the initiatives and investments of the Biden administration in clean energy. For her, extreme weather events were causing property losses and increasing insurance costs, and, as such, needed to be dealt with urgently. While Harris talked of creating new manufacturing jobs through investing in clean energy, Trump’s emphasis was on protecting American industry from foreign competition and utilizing available resources to meet energy needs.
The outcome of the US elections is likely to affect the global compact on climate change, which is already struggling to achieve the target of keeping the rise in global temperatures below 2 degrees, not to talk of the more ambitious and desirable goal of 1.5 degrees. Climate change is one issue that will cut across regions and look for a strong and effective champion to provide leadership. That will depend on who the US voters will choose to lead them for the next four years.
With about 100 countries representing half the world’s population going to polls in 2024, the US would perhaps be the last major country democratically electing its head of the government. The outcome of this election in an era where democracy itself faces serious challenges globally could also have major consequences for the other most significant global challenge of climate change.
Both the rights to liberty and life need a breath of fresh air.
Ashok Lavasa is a former finance secretary of India and vice-president of private sector and public-private partnershop at the Asian Development Bank.
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Publish date : 2024-10-20 21:31:00
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