Much has been written lately about the emerging battle between China and the United States in the race to a low-carbon future. While the US clearly has considerable advantage with its history of success in innovation and technology, its lack of responsiveness, to date, is seeing the advantage steadily move to China.
There is great irony in this. For decades, many western companies have argued against stronger environmental policies on the grounds of loss of competitiveness to China and the developing world – so-called carbon leakage. The argument has been that if western countries made their companies behave more cleanly, Chinese companies would be able to out-compete them because they could pollute freely and therefore have lower costs.
What’s been happening while the west has been delaying action, partly in response to this argument, is that China has caught up and is now seriously pursuing a low-carbon economy. Do they want to save the world? No, they want to own it. As The New York Times‘ Thomas Friedman has argued:
“Yes, China’s leaders have decided to go green — out of necessity because too many of their people can’t breathe, can’t swim, can’t fish, can’t farm and can’t drink thanks to pollution from its coal- and oil-based manufacturing growth engine. And, therefore, unless China powers its development with cleaner energy systems, and more knowledge-intensive businesses without smokestacks, China will die of its own development.”
So China has become an example of what I call The Great Disruption. It is being forced to act, with rapidly increasing intensity, because it is hitting the physical limits of its economic growth model.
Whatever the motivation, China has the potential to dominate the technologies of the future with the advantages of both scale and the capacity for rapid change. It’s looking increasingly likely China will put a price on carbon pollution before the US or Australia can get it through their respective political processes.
China already boasts the world’s richest solar entrepreneur, Dr Zhengrong Shi, and a world-scale electric car and battery company, BYD, that has already boosted Warren Buffett’s wealth by $US1 billion. Indeed in, lists of the top 10 companies in various new energy technologies compiled by investment bank Lazard, the US lags behind Japan, Europe and China, an uncomfortable place for a country that has prided itself on technology and entrepreneurial leadership.
Longer term, there are some deeper issues that will emerge as we see who succeeds in adapting to the emerging world. The western model of market-based democracy clearly dominated the 20th century. Indeed, without China’s success late in the century, it would have been indisputable. While people express various levels of discomfort with the political, social and cultural approach of the US, the world’s people have largely tried to emulate much of what the country represents. Reinforcing this has been the dominance of US power in most areas of competition and conflict, whether it was WWII, the Cold War, the technology revolution, music and film, or overall wealth creation – the US represents the success many aspire to.
As the 21st century gathers momentum however, it is not at all clear the US will be able to maintain its dominance and, critically, whether it will still represent the most effective political and economic model that others will want to follow. China, in recent years, has been making increasingly dramatic decisions to force environmentally-driven change in its economy, while market-based democracies have floundered.
While some are sceptical of China’s capacity to carry through, there is plenty of evidence to suggest their market is already accelerating ahead of the US, being the world’s largest solar PV manufacturer, currently, and the largest market for wind power.
What if the US, saddled by debt and military costs and well behind in the race to new energy technologies, continues to drift while China races ahead? What if China can maintain stability and lead the way forward on the environmental and technology transformation now underway? Will China’s very different approach to decision-making, democratic freedoms and open society be a hindrance as many commentators argue? Or will it be an advantage, enabling them to leapfrog in technology and drive change without the pesky limitations of western democracies’ corporate lobbying and populist politics slowing down change.
If China succeeds and the US fails, the implications could go well beyond the shift in economic competitiveness and wealth. It could undermine the moral authority of democracy and lead to a shift in global geopolitics back towards autocratic regimes. The worse the crisis of The Great Disruption becomes, the greater the risk this will occur. What’s at risk here is certainly more than economic success.
Such a result is certainly not inevitable, after all the US and UK led the victory in WWII against non-democratic enemies. And there are many powerful and proven economic benefits to democracy and freedom, with the US success in technology and innovation often being put forward as an example. Likewise many argue China’s restrictions on freedom will lead that country to political instability and possible breakdown.
Nonetheless, however many of us, myself included, view democracy as a clearly superior system, we should not lose sight of the inherent risk to it in the period we are entering now. This is now a high stakes game.
Whichever way all these issues unfold, and this is probably the most unpredictable area of all, what is very clear is this: The social, security and economic implications of climate change and sustainability will force a major realignment in national competitiveness and geopolitics. In this process, responsiveness to change will determine the winners and losers, not pre-existing power or authority.