Today the economic stats are official: China has surpassed Japan as the second largest economy in the world. Predictions are that if current trends continue, China will pass the United States in 2030 to become #1. But what does this really mean? And does it represent a threat?
The first thing to keep in mind is that China’s huge population is a key factor here. China’s per capita income is still only $4,300. That’s makes it about 1/11th of the United States. So it’s the size of the Chinese population base that is helping them here. For the United States, we are #1 because of productivity.
But does economic size matter? On several key levels it is important. National power is determined by economic power. Without the economic muscle, you simply don’t have the capability to develop and deploy an modern fighting force. High-tech weapons are what matter, not massed armies. If you don’t have the national wealth to spend on advanced systems, you will not be a global superpower. China’s economic rise is being matched by it’s military rise.
Even more important, however, is the fact that economic size gives you the biggest seat at the table of nations. Whether it’s diplomatic questions about currency, peace treaties, or international trade, being the largest economy means that you have a bigger say. This does not guarantee that things will necessarily go your way. If you have poor political leadership this power will be wasted away.
So the race to be the #1 largest economy matters, both in real terms and symbolically. And we need to fight to stay #1. That mean’s playing to our strength and focusing on what works: encouraging risk-taking, entrepreneurship, real education, and promoting a solid work-ethic. We need to have the mindset that we live in a competitive world and we want to remain on top.
I’m all for international cooperation when its in our national interest, but President Barack Obama and his compatriots seem to believe that the nation-state is slowly being submerged to international organizations. And they are helping to move things in that direction. Not only is this view naive, it is also destructive to the American way of life. We are different, we are unique, we are, dare I say it–exceptional. I don’t want to be like the rest of the world! And the rest of the world doesn’t view the nation-state as dead. Countries such as China, India, and Brazil have a strong sense of national pride, and they like multinational organizations because it gives them a chance to leverage their position and move up when compared with the United States.
The big question that looms with China is whether these economic numbers are real. Are they accurately measuring economic output? Are state-run enterprises fudging the numbers? The use of western accounting standards (which can also be manipulated as we’ve seen) is not widespread in many sectors of the Chinese economy. We could be seeing a Chinese bubble, or simple economic myth-making.
The best thing we can do is quit looking over our shoulder and work to make America competitive and powerful. Statism won’t do that. Unleashing the dynamism of the American people will.