Daily Times

Last year, when the UN rejected Trump’s diplomatic gaucherie of recognising Jerusalem as Israel’s capital, it showed that the world could no longer be defined in a strict “polar” orientation. After the World Wars, both Russia and United States were unchallenged powers. However, as explained by Paul Kennedy in his book Rise and Fall of Great Powers, the ‘fissuring of the bi-polar world’ came as soon as the new countries emerged as a process of decolonisation and rules and regulations were set to govern the world.

Needless to say, there have been blatant violations of those rules by the same giants (US’ wars, Russia’s Crimean annexation), but it is safe to think that the countries do not enjoy a carte blanche as they used to.

However, with Trump’s ascension to power and his blunders, The Economist was compelled to warn that “America’s global influence had dwindled under Trump,” and that the US global standing has plummeted. This has given rise to speculation, and some observers have started to think that the US as a superpower has started to lose its influence around the globe. This, however, seems a hasty exaggeration. There is no doubt that China is roaring and rising. Asian economies are expected to progress. Russia and China are forming a new alliance as China’s OBOR gets more ambitious. But there has been a much fortuitous turn of events for the United States translating into a stronger than ever economic growth.

The US raised, what is called the federal fund’s transfer rate, three times last year. The increase in this rate signals the strength of the economy. The Federal Reserve Bank of America is expected to increase it three times this year as well, displaying the confidence they have in their economy.

The unemployment rate stands at 4.1 percent, the lowest since the financial crisis. 200,000 jobs were added in 2017, strongest since 2014. Stock markets are on a bull run. One of the major industries that have seen a revolutionary boom in past years is the Shale. The US oil production has touched 9.88 mbpd. It is estimated to grow to 11mbpd by 2019. However, one has to understand the importance of what is called “energy security” while trying to discern the significance of this change in energy scenario.

There is a correlation between the US prosperity and flow of immigrants. Taxes paid by immigrants not only help in social and welfare programs but innovation and entrepreneurial dimensions are also affected

The 1973 oil shock is still not that old. The West realised the extent of their energy dependence that very day. Motor vehicles and motorcyclist formed huge queues outside gas stations. However, in a strange turn of events, the USitselfis on its way to becoming the next swing producer — a title which was used to refer to the Kingdom of Saudi Arabia (KSA). In 2014, KSA refused to play their role as a swing producer that resulted in where we stand today. The thought of ousting high-cost producers was deceptive. After realisation came to a due correction: Vienna accord of 2016, wherein OPEC-NOPEC producers decided to cut production by a certain amount. But the damage was done. The US successfully touted a “Shale Revolution” as a result of adapting to lower oil prices and technological improvements.

The final result in this boom provides the US with a new advantage in not only energy but also diplomacy. Daniel Yergin, an acclaimed economic historian, termed the recent changes as “a 180-degree turn for the United States”. The US no longer has to worry about ‘supply disruptions’ from the Middle East and Africa.

That, notwithstanding the recent crisis in Venezuela and sporadic tensions in Libya and Nigeria, the petrol prices have not witnessed a spike in the US shows the calm as a result of supply cushion available there. With oil also comes natural gas. Russia is the major exporter of gas to the West. The share can be changed as well. The recent changes in the US tax plans were mouth-watering for many companies who now voice to bring ever more revenues to the US.

But there are some challenges as well. Trump’s rhetoric and actions against immigrants might cost the country. The American population is ageing. And in an ageing population, companies do not thrive, because the spending patterns and frequency is affected. There is a correlation between the US prosperity and flow of immigrants. Taxes paid by immigrants not only help in social and welfare programs but innovation and entrepreneurial dimensions are also affected.

Skilled immigrants interact with the skilled natives creating new ideas, budding new concepts and resulting in new companies and ventures. This, later on, adds to the GDP. This is a virtuous cycle. However, a sharp decline in immigrant flow can offset the effects. Many are also not very confident regarding the economy either. Talks of a Minsky moment can be heard. One of the best indicators of a recession, the US Yield Curve, is flattening. For laymen like us, it means that things are not very positive.

The influence of the US is not going to wane anytime soon. It may be subject to the natural undulations of changes in power, but that the US is a superpower is a fact that no one can ignore. However, another giant is rising. Many countries now have a new shoulder to lean on. China with its One Belt and One Road project, expanding middle class and growing population represent a strong competitor to the US. All the companies in the world want to capture the growing and vibrant market there. A new alliance between Russia and China is brewing up. If the bets are on potential, China is not a bad option. Mr. Xi has undoubtedly made his point. He wants China to rise again and the effort is proving to be a success. The rise of China is a big topic and requires a separate article. We turn to her in the next one.

The writer is a student of International Relations with interest in International Political Economy. He can be reached at osamarizvi10@hotmail.com

Published in Daily Times, February 4^th 2018.