The world economy

The new geopolitics of global business

China and America dominate like never before



Twenty years ago this week the share price of a startup run by an obsessive called Jeff Bezos had slumped by 71% over 12 months. 

Amazon’s near-death experience was part of the dotcom crash that exposed Silicon Valley’s hubris and, along with the $14bn fraud at Enron, shattered confidence in American business. 

China, meanwhile, was struggling to privatise its creaking state-owned firms, and there was little sign that it could create a culture of entrepreneurship. 

Instead the bright hope was in Europe, where a new single currency promised to catalyse a giant business-friendly integrated market.

Creative destruction often makes predictions look silly, but even by these standards the post-pandemic business world is dramatically different from what you might have expected two decades ago. 

Tech firms comprise a quarter of the global stockmarket and the geographic mix has become strikingly lopsided. 

America and, increasingly, China are ascendant, accounting for 76 of the world’s 100 most valuable firms. 

Europe’s tally has fallen from 41 in 2000 to 15 today.

This imbalance in large part reflects American and Chinese skill, and complacency in Europe and elsewhere. 

It raises two giant questions: why has it come about? 

And can it last?

In themselves, big companies are no better than small ones. 

Japan Inc’s status soared in the 1980s only to collapse. 

Big firms can be a sign of success but also of sloth. 

Saudi Aramco, the world’s second-most-valuable firm, is not so much a $2trn symbol of vigour as of a desert kingdom’s dangerous dependency on fossil fuels. 

Even so, the right sort of giant company is a sign of a healthy business ecology in which big, efficient firms are created and constantly swept away by competition. 

It is the secret to raising long-run living standards.

One way of capturing the dominance of America and China is to compare their share of world output with their share of business activity (defined as the average of their share of global stockmarket capitalisation, public-offering proceeds, venture-capital funding, “unicorns”—or larger private startups, and the world’s biggest 100 firms).

By this yardstick America accounts for 24% of global gdp, but 48% of business activity. 

China accounts for 18% of gdp, and 20% of business. 

Other countries, with 77% of the world’s people, punch well below their weight.

Part of the explanation is Europe’s squandered opportunity. 

Political meddling and the debt crisis in 2010-12 have stalled the continent’s economic integration. 

Firms there largely failed to anticipate the shift towards the intangible economy. 

Europe has no startups to rival Amazon or Google. 

But other countries have struggled, too. 

A decade ago Brazil, Mexico and India were poised to create a large cohort of global firms. 

Few have emerged.

Instead, only America and China have been able to marshal the process of creative destruction. 

Of the 19 firms created in the past 25 years that are now worth over $100bn, nine are in America and eight in China. 

Europe has none. 

Even as mature tech giants like Apple and Alibaba try to entrench their dominance, a new set of tech firms including Snap, PayPal, Meituan and Pinduoduo are reaching critical mass. 

The pandemic has seen a burst of energy in America and China and a boom in fundraising. 

Firms from the two countries dominate the frontier of new technologies such as fintech and electric cars.

The magic formula has many ingredients. 

A vast home market helps firms achieve scale quickly. 

Deep capital markets, networks of venture capitalists and top universities keep the startup pipeline full. 

There is a culture that exalts entrepreneurs. 

China’s tycoons boast of their “996” work ethic: 9am to 9pm, six days a week. 

Elon Musk sleeps on Tesla’s factory floor. Above all politics supports creative destruction. 

America has long tolerated more disruption than cosy Europe. 

After 2000, China’s rulers let entrepreneurs run riot and laid off 8m workers at state firms.

The recent erosion of this political consensus in both countries is one reason this dominance could prove unsustainable. 

Americans are worried about national decline, as well as low wages and monopolies (roughly a quarter of the s&p 500 index merits antitrust scrutiny, we estimated in 2018). 

The Economist supports the Biden administration’s aim to promote competition and expand the social safety-net to protect workers hurt by disruption. 

But the danger is that America continues to drift towards protectionism, industrial policy and, on the left, punitive taxes on capital, that dampen its business vim.

In China President Xi Jinping sees big private firms as a threat to the Communist Party’s power and social stability. 

The cowing of tycoons began last year with Jack Ma, the co-founder of Alibaba, and has since spread to the bosses of three other big tech firms. 

As party officials seek to “guide” incumbent private firms in order to achieve policy goals, such as national self-sufficiency in some technologies, they are also more likely to protect them from freewheeling competitors.

The more America and China intervene, the more the rest of the world should worry about the lopsided geography of global business. 

In theory the nationality of profit-seeking firms does not matter: as long as they sell competitive products and create jobs, who cares? 

But if firms are swayed by governments at home, the calculus changes.

As globalisation unwinds, rows are already erupting over where multinational firms produce vaccines, set digital rules and pay taxes. 

European hopes of being a regulatory superpower may become a figleaf for protectionism. 

Others with less clout may erect barriers. 

To assert its sovereignty, India has banned Chinese social media and hobbled American e-commerce firms. 

That is the worst of both worlds, depriving local consumers of global innovations and creating barriers that make it even harder for local firms to achieve scale.

It’s the acorns, not the oaks

It would be a tragedy if only two countries in the world proved capable of sustaining a process of creative destruction at scale. 

But it would be even worse if they turned away from it, and other places admitted defeat and put up barricades. 

The best gauge of success will be if in 20 years’ time the list of the world’s biggest companies looks absolutely nothing like today’s.

Don’t judge the US by its politics

The high Covid vaccination rate suggests a deceptively cohesive and governable nation

Janan Ganesh 

A Moderna Covid-19 vaccine is administered at a clinic last month in Immokalee, Florida. The US has administered at least one dose of vaccine to 63 per cent of adults © Joe Raedle/Getty


Last September, nearly half of all US adults told the Pew Research Center that they would “probably” or “definitely” not accept a Covid-19 vaccine. 

More than four in 10 Democrats were among them. 

It is only in retrospect that the breadth of America’s initial vaccine hesitancy is startling. 

At the time, it was wholly of a piece with a nation lost to quackery, civic decline and near-feral scorn for elites.

It is hard to know where that nation went. 

The US has administered at least one dose of vaccine to 63 per cent of adults, which implies millions of changed minds (and a few bluffers to begin with). 

President Joe Biden is aiming for 70 per cent by July 4. 

Regardless of age, half the entire population is now partly vaccinated. 

With variants of the virus nearer at hand than herd immunity, refuseniks are still plentiful enough to matter. 

It is rash to dismiss their once-daunting movement as a paper tiger. 

But there is no ignoring the broad show of trusting compliance and its threat to all we “know” about this fractious country.

It is time to entertain the exotic thought that America is not its politics. 

The first clue for this epiphany came last year, when a lockdown with few if any peacetime precedents commanded not just wide obedience but supermajorities of assent. 

Biden is president in large part because his predecessor Donald Trump bet on a silent plurality of, “Don’t tread on me” types that never materialised. 

What dissent there was — over the utility of masks, the wisdom of indoor rallies — was real enough and lethal enough. 

But the “culture war” was for the most part a headline in search of nationwide substance. 

Given the tribalism of red and blue America, it should have been much worse.

The pandemic itself was an audit of government. 

Vaccination, at least in countries with sufficient doses, is a test of governability. 

It probes how much voters themselves accept facts, defer to remote authorities and set norms of good citizenship for each other. 

On that score, no rich nation was expected to fare worse than one in its third decade of vicious partisanship. 

Even those of us who don’t use the window into Hades that is social media feared for US take-up rates. 

Instead, it is Taiwan and other Pacific paragons, the cue for much credulous bunk about Asian docility this time last year, that are having to catch up.

The implications here are profound. 

If there is a gap between the noise of America’s public square and the good sense of its mass behaviour (what economists would call its revealed preferences), the first should trouble us much less than it does. 

A country that can at times seem bound for violent rupture might be deceptively cohesive and governable. 

The lesson is as much for its external enemies as anyone else. 

They should not derive too much hope from the US’s discordant politics.

It is hard to push this line of argument far without whitewashing politics as a harmless sideshow. 

It isn’t. 

It gets people killed on the grounds of Congress. 

To judge by the moral arc of the Republican party, there is no respite in the offing. 

But it is sometimes taken for granted that a nation’s public life dictates all its social outcomes. 

The evidence of the moment suggests that it need not. 

At least while the stakes are existential, Americans seem able to outperform their politics.

The mystery is how. 

The Scots have a phrase for a Celtic or Rangers fan who howls sectarian abuse before resuming a blameless life. 

This is your “weekend bigot”. 

It is only one example of our species’ eerie knack for compartmentalisation. 

Lots of people who tell pollsters that Israel had a hand in the September 11 attacks in the US then go about their banal day.

For all its poison, US politics appears to be highly compartmentalised. 

Millions of people use it as an outlet for a coarse or tribal part of themselves. 

But most seem perfectly able to snap out of it when normal life, and especially their practical interests, call.

Their avowed cynicism did not stop multitudes caving in to two technocratic demands in a year: the first on their freedom, the second on their very persons. 

That a large minority of Democrats and Republicans say they would mind their child marrying someone from the other party does not gum up society in a meaningful way.

Seen from this angle, even the fact that most Republicans believe the 2020 election was stolen is chilling, yes, but not proof of trouble to come. 

What matters is how intensely they hold that belief and what, if anything, they would do to act on it. 

September’s anti-vaxxers seemed to mean it at the time. 

Numbers Ain’t What They Used to Be in Turbulent U.S. Economy

Durable goods, jobs and home sales have all wrong-footed economists who didn’t count on big revisions lately

By Justin Lahart

An IceStone manufacturing facility in New York this month./ PHOTO: ANDREW KELLY/REUTERS


There is a rule of thumb in data watching that, if you want to understand which way things are trending, you need to watch the revisions. 

What is happening with capital spending might be a case in point.

The Commerce Department on Thursday reported that U.S. manufacturers’ new orders for durable goods rose 2.3% in May from April, lower than the 2.6% gain economists expected. 

Much of that increase was due to a jump in aircraft orders, which are often lumpy.

The element of the report economists home in on to gauge capital spending plans—nondefense capital goods excluding aircraft—slipped 0.1%. Most had expected it to rise.

But then there were significant revisions to the April durable-goods figures, which now show that orders for nondefense capital goods excluding aircraft rose 2.7% in April from March, versus an initially reported gain of 2.2%. 

That marked the largest monthly increase since July of last year, when the U.S. economy was still lurching out of the spring shutdowns.


Revised data tend to provide a more complete picture of what is happening. 

When the Labor Department releases its monthly jobs figures, for example, it has data from about three-quarters of the employers it has surveyed. 

Over the next two months that response rate is usually over 90%.

If the businesses that respond early to a survey face the same conditions as the ones that respond late, then the data revisions should be minor, but that often isn’t the case. 

Bigger companies can often send responses sooner, for example, and businesses in some industries tend to respond sooner than others. 

They can be dealing with a very different set of circumstances than others.

Those differences might be particularly pronounced now as the economy digests surging demand, shifts in consumer preferences and supply-chain bottlenecks brought on by the easing of the Covid-19 crisis. 

It might well be the case that, once it has more complete data in hand, the Commerce Department ends up revising its capital-goods orders figures higher.

Revisions can cut both ways, of course. 

When the Commerce Department reported May new-home sales on Wednesday, it revised its April figures significantly lower, and the same went for March sales figures. 

Maybe the May data is going to get knocked down, too.

In an unusual economic environment, first impressions can be misleading.

America’s Comeback Tour

Overall, Joe Biden’s recent European tour – his first foreign trip as US president – deserves high marks for both planning and execution. But disagreements among democratic countries will not vanish overnight, nor will the West recover its former global standing any time soon.

Javier Solana



MADRID – US President Joe Biden’s first international tour felt like a breath of fresh air. From the G7 summit in Cornwall to a meeting with Russian President Vladimir Putin in Geneva, Biden carried out his duties with statesmanship and composure – a stark contrast from the mayhem and mendacity that characterized Donald Trump’s foreign visits. 

Biden’s trip sent a clear message: the United States is once again in good hands, which will be held out first and foremost to its traditional allies.

But Biden’s goals extend further: by rallying the world’s democracies to counter China and other autocracies, he hopes to engineer a kind of global democratic renaissance. 

His ability to realize this vision is far from clear. Yet he has wasted no time in getting down to business.

The last US president who chose Europe for his maiden foreign trip was Jimmy Carter, back in 1977. 

Carter’s tour started off in the United Kingdom, where he attended a G7 summit, and later took him to Switzerland, where he met Syrian President Hafez al-Assad (a Soviet ally). 

The parallels with Biden’s trip are unmistakable – and, given his longstanding admiration for Carter, perhaps not entirely coincidental.

But the world has also undergone profound changes since 1977. 

Consider the UK. When Carter visited the country, it had recently joined the European Communities (which preceded today’s European Union) – a move later endorsed overwhelmingly by British voters. 

Today, the UK has recently abandoned the EU and is mired in political turmoil.

For Biden, this demanded a reaffirmation of America’s “special relationship” with the UK, including signing a new Atlantic Charter. 

But it also required a blunt reminder to Prime Minister Boris Johnson that the UK should uphold its commitment to maintain an open border between Northern Ireland and the Republic of Ireland (an EU member), thereby protecting the Good Friday Agreement. 

All in all, if forced to choose between the UK and the EU, there is little doubt that Biden would favor the latter.

The G7 has also changed considerably since Carter’s time. 

When the G7 countries (Canada, France, Germany, Italy, Japan, the UK, and the US) first met in the 1970s, they comprised nearly 70% of the world’s GDP in nominal terms – a share they maintained until the turn of the century. 

But in the last two decades, this share has plunged to about 45%.

Biden’s laudable commitment to strengthening cooperation with the other G7 countries has delivered mixed results. 

On one hand, the world’s wealthiest countries continue to come up short in delivering COVID-19 vaccines to developing countries. 

On the other hand, their recent agreement to establish a global minimum corporate-tax rate of 15% is, as Harvard’s Dani Rodrik put it, “historic.”

Given the G7 countries’ diminishing international weight, however, the agreement’s principles will have to be adopted more widely to have the intended impact. 

And securing broad buy-in will not be easy. 

The next hurdle to clear will be the G20, where significant pushback can be expected, particularly from China, whose human-rights record and trade practices were harshly denounced in the G7 communiqué.

After the G7 meeting, Biden attended a NATO summit in Brussels, which also produced a noteworthy communiqué that singled out China, along with Russia. 

Yet again, this represents a significant shift from the 1970s, when NATO served as the West’s bulwark against the Soviet Union.

The symbolism of NATO placing such strong emphasis on China is not lost on anyone – least of all the Chinese. 

To be sure, many of China’s conventional and non-conventional military actions must be countered. 

But NATO often is not the best vehicle for that, and it should avoid overreaching.

Biden’s summit with European Commission President Ursula von der Leyen and European Council President Charles Michel was the least politically charged yet most consequential event of his European tour. 

The meetings produced a truce in the two sides’ 17-year dispute over subsidies to aircraft companies Airbus and Boeing. 

All retaliatory tariffs have been suspended for five years.

The US and the EU also committed to resolve differences over trade in steel and aluminum by the end of this year. 

While US protectionism will not fizzle out, and the bilateral trade relationship remains beset by tensions, Biden clearly understands that he has to pick his battles and that the EU – the world’s largest trading power – has much leverage to wield.

The final item on Biden’s agenda – his meeting with Putin in Geneva – also reflected a major shift from 1977. 

Of course, the US and Russia remain adversaries on many fronts, and Biden made it abundantly clear to Putin that, unlike Trump, he would not shrug off the Kremlin’s transgressions against the US (such as cyberattacks) and violations of international norms.

But it would make little strategic sense to approach Russia only as an adversary. Biden is thus attempting a tough balancing act. 

While the US is portraying Russia and China as the main spearheads of an autocratic bloc, much in line with the NATO communiqué, Biden is exploring the possibility of reaching some basic understandings with Russia, and perhaps even driving a wedge between it and China.

Overall, Biden’s first foreign tour deserves high marks for both planning and execution. Biden succeeded in drawing a clear line under the previous administration, reassuring America’s European allies, and presenting the US as a “responsible stakeholder” within the multilateral system – precisely what it has long urged China to become.

But disagreements among democratic countries will not vanish overnight, nor will the West recover its former global standing any time soon. 

America is back, and there is cause to celebrate. 

But, like it or not, the US-led unipolar world is gone for good.


Javier Solana, a former EU high representative for foreign affairs and security policy, secretary-general of NATO, and foreign minister of Spain, is President of EsadeGeo – Center for Global Economy and Geopolitics and Distinguished Fellow at the Brookings Institution.

COVID-19 Vaccines and the US National Interest

Nationalism is no way to confront a virus that is indifferent to nationality. Now that safe and effective COVID-19 vaccines are available, the US has four good reasons to lead a Marshall Plan-like effort to immunize the world's poor countries.

Joseph S. Nye, Jr.


CAMBRIDGE – A century ago, an influenza pandemic killed more people than died in World War I. 

Today, the COVID-19 pandemic has killed more Americans than died in all US wars since 1945. 

A big difference, however, is that science did not have a vaccine for the influenza virus back then, but now several companies and countries have created vaccines for COVID-19.

A number of wealthy democracies, including the United States and the United Kingdom, have vaccinated over half their adult populations and seen a dramatic reduction in the number of new cases and deaths. 

Other places, such as India, Brazil, and parts of Africa, have low vaccination rates and high rates of new cases and deaths. 

The Economist estimates that the pandemic’s true global death toll may be something like ten million people, or more than three times the official number reported by national authorities.

Given these grim statistics, should leaders of wealthy countries export vaccines and help vaccinate foreigners before they finish the job at home? 

When former President Donald Trump proclaimed “America First,” he was being consistent with democratic theory, according to which leaders are entrusted with defending and advancing the interests of the people who elected them. 

But as I argue in my book Do Morals Matter? the key question is how leaders define the national interest. 

There is a major moral difference between a myopic transactional definition, like that of Trump, and a broader, far-sighted definition.

Consider President Harry Truman’s espousal of the Marshall Plan after World War II. 

Rather than narrowly insisting that America’s European allies repay their war loans, as the US had demanded after World War I, Truman dedicated more than 2% of America’s GDP to aiding Europe’s economic recovery. 

The process allowed Europeans to share in planning the continent’s reconstruction and produced a result that was good for them, but that also served America’s national interest in preventing Communist control of Western Europe.

There are four major reasons why a Marshall Plan-like effort to vaccinate people in poor countries is in the US national interest. 

First, it is in Americans’ medical interest. 

Viruses do not care about the nationality of the humans they kill. 

They simply seek a host to allow them to reproduce, and large populations of unvaccinated humans allow them to mutate and evolve new variants which can evade the protections that our vaccines produce. 

Given modern travel, it is only a matter of time before variants cross national borders. 

If a new variant arose that was capable of by-passing our best vaccines, we would have to develop a booster targeted at the new variant and vaccinate again, which could lead to more fatalities and more strain on the US medical system, as well as lockdowns and economic damage.

Our values provide the second reason that a vaccine Marshall Plan is in America’s national interest. 

Some foreign policy experts contrast values with interests, but that is a false dichotomy. 

Our values are among our most important interests, because they tell us who we are as a people. 

Like most people, Americans care more about their co-nationals than foreigners, but that does not mean they are indifferent to the suffering of others. 

Few would ignore a cry for help from a drowning person because she calls out in a foreign language. 

And while leaders are constrained by public opinion in a democracy, they often have considerable leeway to shape policy – and considerable resources to influence public sentiment.

A third national interest, related to the second, is soft power – the ability to influence others through attraction rather than coercion or payment. 

American values can be a source of soft power when others see our policies as benign and legitimate.

Most foreign policies combine hard and soft power. 

The Marshall Plan, for example, relied on hard economic resources and payments, but it also created a reputation for benignity and far-sightedness that attracted Europeans. 

As the Norwegian political scientist Geir Lundestad has argued, the American role in postwar Europe may have resembled an empire, but it was “an empire by invitation.” 

A policy of helping poor countries by providing vaccines, as well as aiding the development of their own health-care systems’ capacities, would increase US soft power.

Finally, there is geopolitical competition. 

China quickly recognized that its soft power suffered from the origin story of COVID-19 in Wuhan. 

Not only was there lack of clarity about how the virus originated, but in the early stages of the crisis, Chinese censorship and denial made the crisis worse than necessary before its authoritarian lockdown proved successful. 

Since then, China has assiduously pursued COVID-19 diplomacy in many parts of the world.

By donating medical equipment and vaccines to other countries, China has been working to change the international narrative from one of fault to one of attraction. 

The Biden administration has been playing catch-up, announcing that it will release 60 million doses of AstraZeneca vaccine, as well as 20 million additional dozes of Pfizer, Moderna, and Johnson & Johnson vaccines. 

In addition, the administration has pledged $4 billion in funding for the World Health Organization’s COVAX facility to help poor countries purchase vaccines and supports a temporary waiver of intellectual property to help poor countries develop capacity.

In short, for four good reasons consistent with America’s history, values, and self-interest, the US should lead a group of rich countries in a plan to vaccinate the rest of the world now, even before the job is finished at home.


Joseph S. Nye, Jr. is a professor at Harvard University and author of Do Morals Matter? Presidents and Foreign Policy from FDR to Trump.