Hamish McRae: America’s making itself great again without Trump’s help

Donald Trump left the Quebec City G7 summit in ill temper for a rather different meeting in Singapore. We’ll see what happens there, but because this is going to be a week of rising trade tension, let’s just focus on the president’s proposition that he wants to make America great again. His presumption, widely accepted within the US, is that it has been somehow losing ground. It hasn’t. If anything, it has been gaining importance, certainly within the developed world, and arguably beyond.

The original idea of the G7 was for the leaders of the seven largest economies to co-operate in improving economic performance. A generation ago it was indeed true that the largest economies were the countries meeting in Canada: the US, Japan, Germany, France, the UK, Italy and Canada itself. But that is long past. The pecking order now is the US, China, Japan, Germany, the UK, India and France. If you were to turn it into a G8, you would not bring in Russia as Mr Trump proposed, but Brazil. Russia’s economy is relatively tiny, whereas Brazil, despite its problems, is closing in on France and the UK.

But if the developed world as a whole is losing ground to the emerging economies, within the developed world the US has become much more important.

In 1990, the European Community — which was shortly to become the European Union — was a larger economy than the US, even before the members from eastern Europe signed up. Now the EU is smaller than the US, even before the soon-to-leave UK signs off.

As for Japan, it has been vastly outpaced by the US. Its economy has barely grown since 1990. And Russia? In 1990 the US economy was roughly three times that of the Soviet Union. Now it is more than 10 times the size of Russia and the other USSR successor states, and 15 times that of Russia itself.

If you drill down from the macro numbers, the same pattern emerges: a rising America, not a falling one. Take energy. We don’t obviously have the numbers yet, but it is plausible that this year the US will again become the world’s largest oil producer for the first time since the Seventies. Essentially the US has become a low-cost manufacturing producer, thanks to rising efficiencies and access to quality employees. This is nothing to do with Trump or tariffs: it is simply that US costs have come down and those of many of its competitors have gone up.

One particular and hugely important area of rising US dominance is high-tech. At the beginning of this century there was no iPhone, no Facebook, and Google was in its infancy. But there were other important high-tech companies outside the US. I was aware, as we all are, that the largest US companies are high-tech ones. But I hadn’t fully appreciated the extent to which the US and now China — more of that in a moment — had increased their domination of tech recently. Then I watched the wonderful presentation by internet guru Mary Meeker at the Code Conference in Rancho Palos Verdes, just over a week ago.

There is such a mass of stuff, nearly 300 slides, it’s impossible to summarise here. But take this one fact: five years ago the US had nine of the world’s top 20 (ranked by market capitalisation) internet companies and China had two. The rest of the world had nine. Now the US has 11, China has nine and the rest of the world has… none at all. China is the only effective competitor to America.

But it is America, with Google, Facebook, Amazon, Uber and so on and on, which is shaping the daily life of everyone outside China. To take this argument a stage further, since the Chinese giants were only able to develop because they were protected by the authorities and are to some extent clones of American ones, it is US innovation that by proxy is shaping lives in China too.

Who knows where we go now? It looks as though the country that best develops Artificial Intelligence will bethe next dominant intellectual force, and China seems to be extremely effective here. But for the moment we live in a world more dominated by the US than ever before.