Looking at the Development Engines of the US, China
In terms of economics, the US is currently the richest country with gross domestic product (GDP) of US$23 trillion. However, the ongoing polarization is inseparable from the condition of the domestic economy.
The sociopolitical conditions in the United States have been polarized since the period leading up to the election of Donald Trump as the US President, and still remain polarized under the current incumbent, Joe Biden.
In his election campaign, Biden promised to create a presidency for all citizens. However, the polarization in the US has not subsided until now, to the point that even US political observers have begun to call it a “hyperconflict”, in which people no longer trust anyone has a different point of view.
In terms of economics, the US is currently the richest country with gross domestic product (GDP) of US$23 trillion. However, the ongoing polarization is inseparable from the condition of the domestic economy.
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Nobel laureate Joseph Stiglitz observed that the richest 1 percent of the US population controlled at least 40 percent of US wealth. The data shows that 17 percent of children in the US live in poverty. On the other hand, the US has billionaires like Elon Musk, the only private businessman rich enough to compete with NASA to develop a settlement on Mars and, according to nonprofit media ProPublica, pays no income tax.
US Democrats are therefore campaigning to "tax the rich". However, the revelations in the Pandora Papers, FinCEN Files, and Mauritius Leaks show that, even though the US Treasury is powerful, taxing US billionaires is no easy task.
In education, public education at both the primary and secondary levels is also declining in quality and is not evenly distributed. There are a small handful of public schools whose alumni have won a Nobel Prize, but a growing number of US public schools are underfunded, understaffed and only produce delinquents. However, as the richest country and the victor of a world war, the US still remains a superpower.
Although the US government holds the world's largest debt ($29 trillion), the US dollar is still the main currency of world trade and a foundation of global economic growth. There is no other currency or currency pair at present that can challenge the dominance of the US dollar. Although market risk sometimes comes from the US, investors still hold onto and buy US dollars. It is up to the US leadership to use this strategic advantage to rebuild its economy and maintain global order.
Condition and evolution of China
Looking at the evolution of China is very interesting. After World War II, China was a very poor country. However, since the leadership of Deng Xiaoping, China began to open and reform its economy with average GDP growth of 10 percent almost every year. It is currently estimated that more than 800 million Chinese people have been lifted out of poverty. Chinese growth is not only based on labor-intensive industries with low value-added, but has gradually come to be based on innovation and technology.
Since its reform, China sends about 600,000 students abroad each year. In the past 40 years, 24 million Chinese students have graduated from overseas institutions. They have earned not just bachelor degrees abroad, and many have earned doctorates at the best US universities. An estimated 10 percent of overseas Chinese students have returned home, so China has more than 2.4 million people who hold PhDs from overseas institutions.
In addition, China produces about 7 million bachelor graduates each year, of whom 60 percent have pursued a STEM (science, technology, engineering, mathematics) major. During its period of reform, it recorded a total of 168 million engineering degree holders across political parties, government executives, state-owned enterprises (SOEs) and private companies.
This accumulation of scientific and technological capacity is bearing fruit. Obtaining patent grants is one measure of the ability to innovate. In the past, many people believed that China could only copy, not innovate, while the US always won as the country with the most patents. However, the World Intellectual Property Organization (WIPO) declared China as the champion last year. Every year, the number of patents granted to China grows 9-10 percent, with 75 percent of patent holders holding doctoral degrees, so that China was able to overtake the top nine countries in just 10 years to become the country with the most patent grants in the world.
This extraordinary achievement is inseparable from the extraordinary design and management of its human development strategy. China chose the best 25 universities, each of which has 2-3 core excellencies that are mutually complementary. These schools also have the best teachers.
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During his rule, Deng Xiaoping undertook two major reforms. First was institutional reform from a Marxist to socialist market economy that allowed for individual ownership in addition to collective ownership. China saw the success of Adam Smith's laissez-faire concept and market competition system, as well as the failure of Marxism. Learning from both, China adapted and adopted a socialist market system. Indonesia has also adopted an optimal system as enshrined in Article 33 of the 1945 Constitution. Matters that affect the lives of many people are regulated by the state, while the private sector sees to other aspects.
So we can see that many of the world's strongest companies, such as nickel and coal companies, and most innovative companies are Chinese SOEs.
Second, China is reforming its SOEs. Indonesia has also done this. The management of China’s SOEs is left to professionals so they can grow into competitive, modern companies. So we can see that many of the world's strongest companies, such as nickel and coal companies, and most innovative companies are Chinese SOEs.
Lessons from the US and China
The aspects that have hindered the US and China from successfully overcoming this lag is something that we need to observe, adopt and adapt according to our needs and characteristics.
First, the situation regarding the election of leaders with very different platforms, like Trump and then Biden, apparently did not resolve the polarization, and it is not impossible that this will produce sociopolitical dysfunction in the future. If we go to the US, we often see homeless people in elite cities like Los Angeles and New York. Even though US expertise in science and technology is outstanding, sociopolitical dysfunction could hinder future growth.
Second, China made plans from the beginning on how to adopt and adapt the socialist system with free market characteristics, as well as the development of its human resources so its economy can keep growing with quality. This development plan has been implemented continuously, even though the country's leaders have changed, and it is now in a stable sociopolitical situation.
The US was successful in overtaking Germany in technology due to its reform of higher education institutions (HEI) and these institutions’ collaboration with government and industry, which have resulted in areas such as Silicon Valley and South San Francisco (biotech).
Third, Dani Rodrik, an economist who specializes in growth and development, has observed that human capital is one of the keys to economic growth. The US was successful in overtaking Germany in technology due to its reform of higher education institutions (HEI) and these institutions’ collaboration with government and industry, which have resulted in areas such as Silicon Valley and South San Francisco (biotech).
Likewise, Japan and China have developed a triple helix system (government, industry, academia) to keep developing national innovation that is capable of producing new sources of economic growth.
When I met the presidents of Massachusetts Institute of Technology (MIT) and the National University of Singapore (NUS), it was this academic-industry-government interactivity that was the key to increasing the level of national innovation. China's success cannot be separated from the stability and leadership of Xi Jinping, who continued the development of his predecessors.
President Joko Widodo has a strong record in economic growth, for example by removing poorly targeted subsidies and developing infrastructure and human resources. In addition, Indonesia's pandemic response has also been praised by the international community, infections are well under control, economic growth is being maintained, and debt management and public financial management remain credible.
The President's attendance at COP 26 and G20 has also elevated the role of Indonesian diplomacy at the global level. Leadership quality and reputation at the global level is an important core asset for supporting quality economic development. If we look at the development of a country, it is not enough just to look at the size and growth of its GDP, but also its main engine or core. It is similar to seeing a tiger: it is not enough to just look at its stripes. We also have to check its claws and fangs, which are not immediately visible. Without claws and fangs, the animal is likely not a tiger.
Dato Sri Tahir, Founder, Mayapada Group
(This article was translated by Kurniawan Siswoko)