Welcome to the machine

A comparative assessment of the USA and China to 2035, focusing on the role of technology in the economy

We are in the foothills of a fourth industrial revolution, an upheaval that is likely to be powered by emerging technologies such as artificial intelligence (AI) and robotics. These technologies could radically restructure entire economies and have the power to either enhance human labour or replace it. Which of these outcomes prevails will be largely down to policy decisions made now.

Two global powers already dominate this fast-changing landscape, and the techno-economic competition between the US and China is likely to drive geopolitical and economic outcomes for years to come.

Our ground-breaking report Welcome to the machine, commissioned by the Special Competitive Studies Project, assesses and compares the economic outlook for both countries, and the current and expected future state of their technology sectors.

This report comprehensively quantifies progress in these key sectors. We consider how emerging technologies will impact economic growth, and how policy could maximise technological innovation. Policymakers should take note.

Cover of 'Welcome to the machine' report

Report at a glance

The report analyses how US-China geostrategic competition could play out over the coming decades. It is based on a systematic study involving the latest findings from academia, the use of novel data techniques and the creation of a state-of-the-art techno-economic model.

“Fathom’s analysis is compelling, creative, and data-driven. Erik and his team have provided us insights at the cross-section of economics, innovation, and geopolitics.”

Liza Tobin, Senior Director for Economy, SCSP

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The report finds that:

  • Unless something changes, China’s catch-up to the US will end: its demographic dividend is over, and its productivity growth is expected to slow as it approaches the middle-income trap
  • Technology could be that something, especially if it breaks the link between demographics and economic growth
  • The US has the edge in its techno-economic rivalry with China, but to maintain its lead it needs to be pedal-to-the-metal in driving further innovation
  • A fourth industrial revolution, powered by AI, could have profound effects on both the supply of and demand for labour — public policy will have to find the right balance between the two
  • Public policy can and should be designed to incentivise more innovation, particularly by de-risking spending on research and development

Our proprietary metrics, which we believe to be the first comprehensive attempt to quantify progress in technology sectors, find that the leading US AI companies contribute more to GDP, spend more on R&D and typically produce higher quality innovations than their Chinese peers.

“Policymakers cannot make informed decisions without access to data. Our attempts to quantify the size and progress of key emerging sectors are a step in that direction.”

Andrew Harris, Deputy Chief Economist, Fathom Consulting



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