Opinion | Forget the cold war. US-China rivalry won’t end in triumph for either side

In the battle between the two essentially capitalist economic models – China’s state capitalism and America’s financial capitalism – neither is immune from a collapse of the other, and both currently face a number of challenges

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Published: 1:30am, 19 Apr 2019Updated: 1:50am, 19 Apr 2019

The US-China trade war is cooling. The two nations’ rivalry, however, is just beginning. But this rivalry may not have a clear winner at the end. Their economies are so intertwined, directly and indirectly through integration with rest of the world, that when one collapses, it will take down the other – and probably the whole world, too.

Three decades ago, the rivalry between the Soviet Union and the United States ended with the collapse of the former and the triumph of the latter. The outcome was clear because of the complete separation of their economies. There was no collateral damage from the collapse of one side to the other.

The contrast in economic models isn’t so stark today. The Soviet Union practised strict economic planning. It couldn’t produce enough consumer goods to satisfy the people and maintained stability through rationing. With rationing, however, also came a huge monetary overhang. When the rationing was abandoned, it led to massive inflation, which brought the house down.

On the other hand, the US and its Western allies practised welfare capitalism. The social safety net cushioned the disruptive impact of the creative destruction of entrepreneurial capitalism. The balance between efficiency and stability was good enough to outlast the economic planning model.

A woman sits on a bench in Cuba, New York. During the cold war years, the welfare capitalism practised by the US and its Western allies, which struck a good balance between efficiency and stability, outlasted the Soviet Union’s economic planning model. Photo: AFP

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