FacebookTwitterGoogle+RedditEmail

China as the World’s Largest Economy

The news that China will displace the U.S. as the world’s largest economy this year is big news. For economists who follow these measurements, the tectonic shift likely occurred a few years ago. But now the World Bank is making it official, so journalists and others who opine on world affairs will have to take this into account. And if they do so, they will find that this is a very big deal indeed.

What does it mean? First, the technicalities: the comparison is made on a purchasing power parity (PPP) basis, which means that it takes into account the differing prices in the two countries. So, if a dollar is worth 6.3 renminbi today on the foreign exchange market, it may be that 6.3 renminbi can buy a lot more in China than one dollar can buy in the U.S. The PPP comparison adjusts for that; that is why China’s economy is much bigger than the measure that you have most commonly seen in the media, which simply converts China’s GDP to dollars at the official exchange rate.

The PPP measure is a better comparison for many purposes. For example, take military spending: the money that China needs to build a fighter jet or pay military personnel is a lot less than the equivalent in dollars that the U.S. has to pay for the same goods and services. This means that China has a bigger economy than that of the U.S., for purposes of military spending. And in a decade, the Chinese economy will most likely be about 60 percent bigger than the U.S. economy.

President Obama has just returned from a trip to Asia where he was criticized for not being “tougher” with China. However, Americans may want to consider whether “containing” China with a “pivot” to Asia is an affordable proposition. When the U.S. had an arms race with the Soviet Union, the Soviet economy was maybe one-quarter the size of ours. We have not experienced an arms race with a country whose economy is bigger than ours, and whose economic size advantage is growing rapidly. Are Americans prepared to give up Social Security or Medicare in order to maintain U.S. military supremacy in Asia? To ask this question is to answer it.

Fortunately, such an arms race is not necessary. China is a rising power, but the government does not seem to be interested in building an empire. Unlike the United States, which has hundreds of military bases throughout the globe, China doesn’t have any. The Chinese government seems to be very focused on economic growth; trying to become a developed country as soon as it can. Since China has 1.3 billion people, having an economy the size of the U.S. means that average living standards are less than one-fourth of ours. They have a long way to go to become a rich country.

Of course, just because an arms race is unnecessary or unwinnable doesn’t mean it can’t get started. The Washington foreign policy establishment is much accustomed to the authority, prestige, and privilege of being the overwhelmingly dominant power on the planet. And as we saw during the eastward expansion of NATO in the 1990s – now coming back to haunt us in a new Cold War with Russia – there are politically powerful military contractors that can also have a voice in U.S. foreign and military policy.

The American people, according to polling data, are of another point of view. They are largely tired of unnecessary wars and mostly sympathetic to President Obama’sresponse to critics while in the Philippines: “Why is it that everybody is so eager to use military force, after we’ve just gone through a decade of war at enormous cost to our troops and to our budget?” he asked. It is arguable that the only reason our government is able to maintain an imperial foreign policy is that so few Americans serve in the military and pay the ultimate price for it.

Still, there is a powerful ideology of American exceptionalism and a widespread belief that if the United States does not run the world, somebody worse – possibly China – will. The fact that the U.S. and its European allies still have more democratic societies with more developed rule of law than most middle-income countries – despite thesetbacks of the past decade – reinforces this notion that the world will be worse off if the U.S. loses power and influence.

But the U.S. lost most of its influence in Latin America over the past 15 years, and the region has done quite well, with a sharp reduction in poverty for the first time in decades. The Washington-based International Monetary Fund has also lost most of its influence over the middle-income countries of the world, and these have also done remarkably better in the 2000s.

In the 18th century, those who opposed democratic revolutions like that of the United States had dystopian visions of governance without monarchy. So, too, our foreign policy establishment cannot imagine a multi-polar world where the U.S. and its allies must negotiate more and give orders less often. But economic trends are making this reality inevitable, and Americans should embrace it. Whatever the internal political systems of the countries whose representation in the international arena will increase, the end result is likely to be more democratic governance at the international level, with a greater rule of international law, fewer wars, and more social and economic progress.

Mark Weisbrot is an economist and co-director of the Center for Economic and Policy Research. He is co-author, with Dean Baker, of Social Security: the Phony Crisis.

This essay originally ran in the Guardian.

More articles by:

Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. and president of Just Foreign Policy. He is also the author of  Failed: What the “Experts” Got Wrong About the Global Economy (Oxford University Press, 2015).

Weekend Edition
January 18, 2019
Friday - Sunday
Melvin Goodman
Star Wars Revisited: One More Nightmare From Trump
John Davis
“Weather Terrorism:” a National Emergency
Jeffrey St. Clair
Roaming Charges: Sometimes an Establishment Hack is Just What You Need
Louisa Willcox
Sky Bears, Earth Bears: Finding and Losing True North
Robert Fisk
Bernie Sanders, Israel and the Middle East
Robert Fantina
Pompeo, the U.S. and Iran
David Rosen
The Biden Band-Aid: Will Democrats Contain the Insurgency?
Nick Pemberton
Human Trafficking Should Be Illegal
Steve Early - Suzanne Gordon
Did Donald Get The Memo? Trump’s VA Secretary Denounces ‘Veteran as Victim’ Stereotyping
Andrew Levine
The Tulsi Gabbard Factor
John W. Whitehead
The Danger Within: Border Patrol is Turning America into a Constitution-Free Zone
Dana E. Abizaid
Kafka’s Grave: a Pilgrimage in Prague
Rebecca Lee
Punishment Through Humiliation: Justice For Sexual Assault Survivors
Dahr Jamail
A Planet in Crisis: The Heat’s On Us
John Feffer
Trump Punts on Syria: The Forever War is Far From Over
Dave Lindorff
Shut Down the War Machine!
Mark Ashwill
The Metamorphosis of International Students Into Honorary US Nationalists: a View from Viet Nam
Ramzy Baroud
The Moral Travesty of Israel Seeking Arab, Iranian Money for its Alleged Nakba
Ron Jacobs
Allen Ginsberg Takes a Trip
Jake Johnston
Haiti by the Numbers
Binoy Kampmark
No-Confidence Survivor: Theresa May and Brexit
Victor Grossman
Red Flowers for Rosa and Karl
Cesar Chelala
President Donald Trump’s “Magical Realism”
Christopher Brauchli
An Education in Fraud
Paul Bentley
The Death Penalty for Canada’s Foreign Policy?
David Swanson
Top 10 Reasons Not to Love NATO
Louis Proyect
Breaking the Left’s Gay Taboo
Kani Xulam
A Saudi Teen and Freedom’s Shining Moment
Ralph Nader
Bar Barr or Regret this Dictatorial Attorney General
Jessicah Pierre
A Dream Deferred: MLK’s Dream of Economic Justice is Far From Reality
Edward J. Martin
Glossip v. Gross, the Eighth Amendment and the Torture Court of the United States
Chuck Collins
Shutdown Expands the Ranks of the “Underwater Nation”
Paul Edwards
War Whores
Alycee Lane
Trump’s Federal Government Shutdown and Unpaid Dishwashers
Martha Rosenberg
New Questions About Ritual Slaughter as Belgium Bans the Practice
Wim Laven
The Annual Whitewashing of Martin Luther King Jr.
Nicky Reid
Panarchy as Full Spectrum Intersectionality
Jill Richardson
Hollywood’s Fat Shaming is Getting Old
Nyla Ali Khan
A Woman’s Wide Sphere of Influence Within Folklore and Social Practices
Richard Klin
Dial Israel: Amos Oz, 1939-2018
Graham Peebles
A Global Battle of Values and Ideals
David Rovics
Of Triggers and Bullets
Elliot Sperber
Eddie Spaghetti’s Alphabet
January 17, 2019
Stan Cox
That Green Growth at the Heart of the Green New Deal? It’s Malignant
David Schultz
Trump vs the Constitution: Why He Cannot Invoke the Emergencies Act to Build a Wall
FacebookTwitterGoogle+RedditEmail