The scourge of the coronavirus has exposed glaring weaknesses in capitalism and democracy all over the world.
With wages for some stagnating and a growing digital divide, divisions in societies, and the gap between the haves and have-nots, have never been starker.
While western countries flounder in the face of the pandemic and face challenges to their democracies, China has pulled ahead by containing the disease through technology and authoritarian rule.
It is not hard to imagine that in five years’ time China’s ambitions and technological progress, particularly in mitigating climate change, will determine the state of the world.
One way to foretell that future is, improbably, to take a look at the distribution of this year’s Beaujolais Nouveau. The sales of the red wine started around the world on November 19. In Japan, where the first arrival of the season is celebrated every year, the volume of imports has dropped to less than half their level 30 years ago, when Japanese consumption first took off in a bubble economy.
In years past, Japanese media outlets reported the arrival of aircraft loaded with Beaujolais Nouveau from France. But this year the “eco-Nouveau” wine was transported by train from France to Shanghai, a journey of some 10,000km, before being ferried to Japan by ship.
Carbon dioxide emissions by rail transport are one-twentieth of those by air, while the cost of rail is one-third that of air transport. The bottles featured a sticker proclaiming the wine’s environmentally friendly credentials.
China isn’t just a stop in the wine’s supply chain. Its place in what was previously mostly a France-Japan business arrangement has grown massively. Despite the pandemic, Japan remains the biggest importer of Beaujolais Nouveau. But China is already the world’s third largest importer of wine overall.
On a bigger scale, the coronavirus crisis is forcing a review of societies and economies, a situation labelled the Great Reset by the World Economic Forum. When it comes to the environment, the acceleration of technological progress as businesses undergo digital transformation will also reduce emissions.
Excluding the US, Japan has lagged major developing countries in fulfilling the Paris climate pact. But Prime Minister Yoshihide Suga declared in October that Japan will be carbon-neutral by 2050. As Japan can no longer rely on nuclear power in the wake of the 2011 earthquake, innovation will be crucial to turning renewable energy into stable power sources to achieve the 2050 target.
Makers of automobiles, the biggest consumer durable of 20th century civilisation, also have no choice but to adapt. The transition from gasoline-fuelled vehicles to electric and hydrogen power, which will drastically reduce CO2 emissions, is fast approaching. Current market leaders will not necessarily be winners in the future.
Employment will also see rapid change. Carl Benedikt Frey of Oxford university once predicted that half of the world’s current jobs would disappear due to artificial intelligence.
In his recent book, The Technology Trap: Capital, Labor, and Power in the Age of Automation, he points out that innovation has two aspects — it either substitutes for labour or complements it, thus creating new jobs.
History bears this out. Spinning and weaving machinery in the early stage of the Industrial Revolution drew rural home manufacturing into urban factories, leading to the machine-smashing Luddite revolt.
On the other hand, the invention of the steam engine and the era of the Ford Model T brought mass production and mass employment, creating an affluent middle class typified by the Golden Fifties in the US.
A recent report by the Massachusetts Institute of Technology cites the importance of education and investment in human resources and warns that in the absence of a strategy, jobs will be lost and divisions in society will widen.
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It clearly explains why so many Americans support president Donald Trump. With the evaporation of manufacturing jobs in the rustbelt states, workers have been driven into low-paying jobs. At the other end of the spectrum, those who work for big tech companies — such as Google, Apple, Facebook, Amazon and Microsoft — are highly paid. This gap continues to widen.
The same MIT report attributes Japan’s long-term stagnation to the fact that it has clung to an employment and tax system intended for mass production in its high-growth period. Even now, 30 years later, the country has yet to fully climb aboard the digital train, although there are fewer concerns about employment compared to other major economies.
Against such an unstable global backdrop, China is growing as a superpower. Even after Democrat Joe Biden is sworn in as president in January, tensions between the US and China will continue as the two countries vie for global dominance. Donald Trump’s tenure as president has eroded American leadership of the free world. Whether it can regain lost ground under Biden remains to be seen.
The military balance between the US and China in the Taiwan Strait is also significantly different from the 1990s, when it was overwhelmingly favourable for the US.
As the US struggles to rebuild its reputation and heal its own divides after the chaotic and disruptive Trump presidency, Japan and Europe must step in to shore up the global order and free trade arrangements.
Japan is a central member of both the Trans-Pacific Partnership trade agreement, of which the US and China are not members, and the Regional Comprehensive Economic Partnership trade pact in East Asia, to which the US does not belong either. The fortress of free trade cannot be protected without the active involvement of Japan and Europe.
The writer is senior executive editor at Nikkei