May 1, 2012 |
Politicians in the United States must ritualistically
assert that the United States is and always will be the world's leading
economic, military and political power. This chant may help win
elections in a country where respectable people deny global warming and
evolution, but it has nothing to do with the real world.
Those familiar with the data know that China is rapidly gaining on
the United States as the world’s leading economic power. According to
data from the International Monetary Fund
China’s economy is currently about 80 percent of the size of the U.S.
economy. It is projected to pass the United States by 2016.
However, there is a considerable degree of uncertainty about these
numbers. It is difficult to accurately compare the output of countries
with very different economies. By many measures China is already well
ahead of the United States.
It passed the U.S. as the world’s biggest car market in 2009. In most
categories of industrial production it is far ahead of the United
States and it is a far bigger exporter of goods and services. The number
of people graduating college each year with degrees in science and
engineering far exceeds the number in the United States. And China has
nearly twice as many cell phone and Internet users as the United States.
China still has close to half of its population living in the
countryside. The living standard of the 650 million people living in
rural areas is much lower than in urban areas and also much more
difficult to measure. The main reason that living standards are
difficult to gauge is that prices are much lower in rural areas.
A new study
carefully examined China’s prices and consumption patterns concluded
that it is far wealthier than the widely used data indicate. According
to this study, China’s economy may already be as much as 20 percent
larger than the U.S. economy. Furthermore, even if its growth rate slows
to the 7.0 percent annual rate that many now expect, China’s economy
may be close to twice the size of the U.S. economy in the span of a
This raises all sorts of interesting questions about the future of
the U.S. and China in international relations. Regardless of whether or
not China’s economy is bigger than the U.S. economy, it clearly does not
exercise anywhere near as much influence internationally. China’s
leaders have been content to let the U.S. continue to play the leading
role in international bodies and in dealing with international
conflicts, intervening only where it felt important interests were
This pattern should not be surprising since the United States was
slow to assert itself internationally, even though by every measure it
was the world’s pre-eminent power following World War I. The result was
that for the next quarter century, the United Kingdom ended up imagining
itself to be far more important to the world than it actually was.
Perhaps the United States is doomed to play a similar role.
The growing power and influence of China will have both positive and
negative aspects. On the negative side, democracy in the United States,
even with the corrupting impact of money on politics and the abuses of
freedom carried out in the name of the War on Terrorism, still presents a
better political model than one-party rule in China.
Fortunately, China has shown no interest in trying to impose its
political system elsewhere. For this reason the ascendency of China may
not pose a threat to the spread of democracy elsewhere. (Of course, in
spite of its ideals, the United States has hardly been a consistent
supporter of democracy in other countries.)
The growing power of China has already increased the options
available to many countries in the developing world. Since China can
provide far greater amounts of capital than the IMF, World Bank, and
other U.S.-dominated institutions, it provides developing countries with
an important alternative. They need not adopt policies to appease these
institutions to weather economic storms.
One area in which China’s policy can have an enormous impact is
intellectual property. The rules on patents and copyrights that the
United States has sought to impose on the rest of the world are
incredibly wasteful. This is most apparent in prescription drugs, where
patent monopolies allow companies to charge hundreds or even thousands
of dollars for drugs that would sell for $5-$10 in a free market.
Not only do patents make cheap drugs incredibly expensive, they also
lead to bad medicine, as huge patent rents encourage drug companies to
lie and cheat to sell more of their drugs. It’s rare that a month passes
when we do not hear of a scandal where a drug company concealed
information about the safety or effectiveness of its drugs.
Of course the problems with the U.S. system of intellectual property
go well beyond drug patents. Patents in high tech are primarily about
harassing competitors. The difficulty of enforcing copyrights in the
Internet Age has led to absurdities like the Stop Online Piracy Act.
China does not itself enforce intellectual property with the same
vigor as the United States. Rather than following the United States
blindly and impose the same sort of archaic and inefficient system
domestically, China could do the world an enormous service if it would
promote alternative mechanisms for supporting research
It’s clear that the rise of China will lead to many changes around
the world. Political leaders in the United States will no doubt catch up
with the reality of the new U.S. position in the world – probably about
the time that they accept global warming and evolution.
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