Why the USA is cosying up to India
IN 1991, when the Soviet Union collapsed, the USA became the only global gendarme. Its economy at that time was 16 times the size of China’s. Today, China’s GDP has crossed two-thirds that of America’s. That too is only true when we compare the two GDPs in terms of US dollars. If one had to look at purchasing power parity, or what each currency could buy in their own countries, China’s GDP is actually 25 per cent bigger than the USA’s. Indeed, by 2035, China is expected to cross the USA even in dollar terms.
What does that mean for the world economy and geopolitics? The first thing to remember is that even when China overtakes the USA as the largest economy, its per capita income will still be much lower. That means it will still not be able to generate as much surplus that America can. That is why the total net wealth of the US is 86 per cent higher than China’s, whereas its GDP is just 40 per cent more. This means the USA will still have more capital to invest than China, as a whole.
However, the US government knows that this gap is closing fast. China now has 495 billionaires to America’s 735. On top of that, the Chinese economy is closely monitored, guided and financed by the government, which allows it to deploy productive resources in a more organised — and deliberate — fashion than free markets can. So, China can be more disciplined about its economic and military goals, investing in artificial intelligence, robotics, digital finance and other future-proof technologies. Take ‘plug-in’ electric vehicles, for instance. China now has 46 per cent of the world’s electric passenger cars, 98 per cent of the global stock of electric buses and 65 per cent of all light commercial vehicles. And they have been making this transition systematically and quietly.
Chinese goods have already taken over the world. Now, China is busy exporting its capital to low-income countries in Asia and Africa. Its Belt and Road Initiative (BRI), also known as One Belt, One Road, plans to build top-class infrastructure in over 150 countries. Chinese companies will build roads, ports, railways, airports, dams, tunnels, power stations and even skyscrapers to create an economic corridor for Chinese goods and investments. China is going to fund it through its own version of an IMF-World Bank-type multilateral lending institution, called the Asian Infrastructure Investment Bank. Although the bank has 57 member countries, 26 per cent of its initial capital is controlled by China. This is a project for a Chinese century, where it will become the dominant partner in the bulk of the world’s poor countries, touching 60 per cent of the world’s population.
This is an obvious cause for concern for the USA. It knows that time is running out for the unipolar world which has existed for the past three decades. Russia’s war in Ukraine has already opened up the global fault-lines, with many developing countries refusing to toe the American line. It is clear that NATO has lost its teeth and the USA needs to widen its network of allies — indeed, even rethink its geopolitical strategies completely. The NATO countries today account for 45 per cent of the world economy, while China and Russia jointly make up almost half (around 22 per cent) of that.
If the USA and NATO want to check China’s rise, they will need an ally which is likely to grow fast. India is in the best position to play that role. Our economy might be in a shambles, but we are big in aggregate terms, not only in terms of our GDP, but also our population and geographical size. India flanks China to its south-west and could be an invaluable ally in any future armed conflict between China and the West. India also has a historical legacy in Africa, which China is attempting to turn into its sphere of influence. India’s diplomatic clout among the African nations can be of great use to the USA, which is viewed with deep suspicion there.
More importantly, India is a stable economy where big American companies can set up shop. There is growing pressure from the American government on its corporates to shift manufacturing out of China. But American monopoly capital is understandably reluctant, because this will increase its costs of production and eat into its profits. To nudge American capital, the US government is offering big subsidies and tax breaks. It is also negotiating deals with countries like India. And our government is only too willing to oblige them by offering cheap loans, easy terms, discounted land — everything that can help US monopolies improve their profit margins.
It is in the interest of India’s elite to align with the USA. In the past 30 years during which our economy has closely emulated American capitalism, the elite have gained immensely and have cornered almost all the economic benefits of reforms. We now have a political-corporate-security complex that operates almost autonomously from the rest of the body politic, while managing to maintain its hegemony over it. It will welcome an economic, diplomatic and military alliance with the US to place itself on the big boys’ table. This is also the best way to secure India from China’s potential expansion plans.
Whatever shape this alliance takes, it will only increase the authoritarian and centralising tendencies that we are seeing in India. The US does not like too much internal democracy in its Third World allies. History is replete with examples of authoritarian and quasi-authoritarian regimes that have been backed by the USA across Asia, Africa and Eastern Europe. It will be in America’s interests to ensure that protests and dissidence are minimised even in India. This will be especially true for all working people, whose rights will necessarily be curtailed to maintain the hegemony of neoliberal economic policies and finance capital. India, therefore, is stuck between a rock and a hard place. We have a future superpower China in our backyard, while the world’s biggest bully is knocking on our front door.
The author is a senior economic analyst
