Friday, August 05, 2005

Common Sense on China

Since the June 27 "Special Report" from Time magazine, there has been a run on the coming Chinese hegemony. Tom Barnett smartly pulls these pieces from Ben Stein's reality check:

ONE disadvantage of being 60 is that you have to get up in the middle of the night, often more than once. But a big advantage of advancing age is that you get to recognize news media silliness when it happens.

This comes to mind in terms of the economic relationship between the United States and China. Partly because a company affiliated with the Chinese government has made a bid to buy Unocal, a large American oil company, there is a lot of talk in the news media about how powerful China has become and how weak and pitiful the United States has become. There is talk of Chinese dominance over the world economy, and, from what I can gather, a general fear that soon we will be in peonage to the Chinese ...

Consider the most optimistic C.I.A. data about China in 2004. It says China has a purchasing power parity G.D.P. of (very) approximately $8 trillion, compared with roughly $12 trillion for the United States. Again, this is for a nation with nearly five times our population. Even when using this most astoundingly optimistic estimate - I would almost say a preposterous estimate - China has a per capita G.D.P. of about $6,000, or about 15 percent of America's and well below that of any nation in Western Europe, or of Japan, Israel, Taiwan and many other countries.

In other words, the United States is vastly richer than China by any measure. This is not to boast, but it's also not to be afraid of imminent world-pauper status ...

It is true that China is industrializing at a fantastic pace ...

But suppose that these trends continued for 25 more years. Chinese per capita G.D.P. would be about $65,000 in 2040, and American per capita G.D.P. would be about $84,000. Again, this assumes that we use the most optimistic possible estimates of current Chinese G.D.P.

If we used the more conservative, non-C.I.A. estimates of where Chinese per capita G.D.P. is now, in 25 years it would be about $17,500- and this assumes the continuation of China's recent sizzling growth rates. That would put China's per capita income in 2030 at roughly one-sixth of our level.

In other words, it will be a long time before Chinese per capita G.D.P. matches ours. And for that to happen, it will take a previously unheard-of growth rate for an unheard-of length of time. This is a big series of ifs, especially for a country with a rapidly aging labor force and an inherent contradiction between dictatorship and free markets.

The fact that our neighbors are worse off does not make us richer, and the fact that they are better off does not make us poorer ...

But we can certainly learn something from China. Individuals and nations become rich by investing in human capital - getting a good education, learning good work habits, saving and investing prudently and living healthy lives ...

The moral here is simple: learning from our friends, the Chinese, means something. Fearing and envying them means nothing.
Couldn't have said it better myself.

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