Paul Podolsky

Macroscope | How the real cost of any US-China conflict will be felt for years in lost productivity

When tensions such as those over Taiwan and the South China Sea spill over into violence, productivity plummets and wealth is destroyed

Nationalism and negative views of China are rising worldwide, and any shift from the status quo could destroy productivity for decades to come

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Why you can trust SCMP

A mural which says “defend the homeland” painted on a wall on Taiwanese-controlled Quemoy island, which lies around 6km from mainland China, in the Taiwan Strait. Photo: AFP

Paul Podolsky

Published: 12:30am, 18 Mar 2021Updated: 1:50am, 18 Mar 2021

When it comes to asset allocation, I am less worried about a taper tantrum over a sudden rise in US interest rates than a violent US-China clash.

In this context, it is useful to consider the true cost of conflict. The cost is much higher than a direct calculation like military expenditure; an accurate measure must include lost productivity. While the obvious potential source of military conflict is Taiwan or the South China Sea, anxiety is also rising over Hong Kong, Covid-19, the trade war, sanctions, cyberwar and so on.

In the long term, economic growth is driven by productivity. We are in the midst of a disruptive, transformative wave of productivity. I write this overlooking Long Island Sound, having just spoken over video conference with a Google employee in Delhi about a book advertising campaign.

The video somehow flowed through my phone hotspot. We chatted about the relative speed of vaccine distribution in Delhi and Connecticut, a vaccine created in record time. The list of such innovative moments goes on and on. Amid such wonders, fighting over land or who can read what newspapers seems anachronistic. Yet, nationalism persists.

02:19

China-India border dispute fuelled by rise in nationalism on both sides

The primitive parts in our brains that instinctively fear change and doubt people who do not look or talk like us remain intact. Calculating politicians tap into those primitive urges. Also, the cultural collisions this new technology accelerates are real. While the Google employee and I were of one mind about technology, our cultural traditions are distinct.

Macroscope | How the real cost of any US-China conflict will be felt for years in lost productivity

When tensions such as those over Taiwan and the South China Sea spill over into violence, productivity plummets and wealth is destroyed Nationalism and negative views of China are rising worldwide, and any shift from the status quo could destroy productivity for decades to come

When tensions such as those over Taiwan and the South China Sea spill over into violence, productivity plummets and wealth is destroyed

Nationalism and negative views of China are rising worldwide, and any shift from the status quo could destroy productivity for decades to come