Somehow I doubt these predictions are going to bear out. History always repeats itself. In the 1980s it was Japan that was going to crush the American economy. For the last twenty or so years the Japanese economy has been flat (it's still the 3rd biggest in the world however).
Japan tried to boost the economy with massive expenditures in it's infrastructure, to no avail. Compare that to China's approach of building high speed rail networks that get cancelled, and to build huge 'cathedrals in the desert' - cities that are overpriced by the government, who refuse to let the price to be dictated by the market (which is what would happen in a true capitalist system). The result is that most locals are priced out of the market. The reason that the cities are being built in the first place is to drive growth figures. Not having any oversight may result in some dramatic revelations about China's supposed growth in the coming years.
Japan has never had more than one half the population of the US. For Japan to have become a larger economy it would have required the average Japanese citizen to be around twice as productive as the average US citizen. They're productive, but not that much.
China has four times the population of the US. They're already the world's second largest economy based on the development of about 350-400 million people in the eastern section of the country alone, and they still have another ~800 million to go spread through the rest of the country. While there are significant obstacles to further developing countries the size of China and India, they have untapped potential left that Japan didn't.
History does indeed have a tendency to repeat itself, and if you go a little further back than the eighties you'll se that the way empires usually fall is by overreaching, and trying to control and colonise beyond their ability. In the end they implode.
If you are saying that no economy will ever overtake US...that obviously seems far fetched. If you are saying it might happen, but not in 2016, then you have obviously not provided a sound argument as to why you believe so. Just because somebody predicted Japan overtaking US incorrectly in the past- is not an argument to justify your claim.
China and Japan are nothing alike, so the entire argument here is moot.
Additionally, the average Chinese person is beyond capitalistic. China is hyper-capitalist, if anything. And no other country needs to look after 1.3B people, so China is essentially the first experiment in government for a population of that size.
China's going to become the world's largest economy -- there's essentially no doubt about this. Americans need to get used to not being #1 anymore. I know it's hard to swallow. :)
The world is going to look very, very different in 10 years.
Remember that China holds a lot of our debt. You will not see much public chest beating from China over this because of that fact. Both are equally vested in each others success as the other. China does not want value of the US bonds to plummet and US needs a stable manufacturing partner. At least for the foreseeable future, this economic and political two-step will continue.
However this does present serious doubts about the irrational exuberance in the strength of our markets for long term. It is hard to gauge China and its intentions. I am not saying that US has moral supremacy over China, but that China seems to be doing now what US used to do, for its own stability sake, twenty years ago. It is preparing to be the economic behemoth, despite the troubles it face in real estate and regionally.
The next twenty years should be pretty interesting.
Edit: I wanted to add a reference to this paper out of the Pentagon from two Pentagon top level staffers who assert that we should reduce our military spending and reinvest it in our youth. A very prescient analysis of where United States is heading, in the world. I wanted to add it as its own HN submission, but was not sure if it would be well received. Here is the link to the pdf: http://www.wilsoncenter.org/events/docs/A%20National%20Strat...
Under PPP, the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America’s share of the world output down to 17.7%, the lowest in modern times. China’s would reach 18%, and rising.
So we won't be the top any longer, but we'll still be enormously dominant. So? Competition drives innovation.
All the "America is doomed" folks act as if America is going to crumble to pieces simply because we are no longer the only gorilla in the room.
The danger comes when China has enough money to equal the US in military strength and decides it wants as much influence in World politics as America does.
The rest of the World doesn't need that complication.
There are _huge_ economic, cultural, and military benefits to being the sole superpower that don't exist for country number two.
These benefits are, in essence, virtuous cycles that give the superpower a advantages on the world stage just by virtue of already being in first place. Think of it like compound interest, or a really big ball in Katamari Damacy, only for geopolitical power. That is, the US can arrange things in its favor to make it more powerful just because it's already quite powerful and no other country is.
As an example, the United States Dollar is the de-facto reserve currency for the rest of the world. That means that the US can purchase things without having to first go through (expensive) currency exchange, giving the US an economic advantage. The reserve currency status is also a major factor that also allows the US to borrow money pretty much at will.
Similar arguments can be made about cultural, military, diplomatic, and other power.
That means that countries aspiring to be the superpower have the deck stacked against them. So when, despite this, China overtakes the US, the US will have an awful lot of catching up to do. It's not fighting for food in the streets, but it would be a fairly serious blow to the US.
> It’s a lesson we could learn more cheaply from the sad story of the British, Spanish and other empires. It doesn’t work. You can’t stay on top if your economy doesn’t.
Kind of tongue-in-cheek - but that's a lesson I learned from playing Civilization. I know it's just a game, yadda yadda, but sometimes I do wonder how much of it translates into reality. E.g., if this was a game of Civ, China's domination would be pretty much ensured at this point: they have so many "cities" that their "production" output and "science" output will overtake anyone else's in short order.
In fact, that's how I prefer to play the game often: just build minimal defenses to make sure my cities are not conquered, and invest in growth as much as possible. Sooner or later, I'm the 800 kg gorilla of the whole Civ map.
From what I remember, the overhead of high city counts in IV can be prohibitively high. It makes more sense to scale vertically rather than horizontally. Unless, of course, you employ the State Property civic (apt!). Interestingly, China has been switching to the Free Market civic for the last couple of decades... More trade routes and more incentive to support corporations, but higher overhead for the huge city count. There's a reason why you go through revolution when you change civics.
I think the difference in the real world is one of quality. Quantitatively we may have the same or less number of factories or scientists, but the quality of our science and research is so much better I think it would be very hard for China to compete if things turned hot.
"According to the IMF forecast, whomever is elected U.S. president next year — Obama? Mitt Romney? Donald Trump? — will be the last to preside over the world’s largest economy."
Technically this has already happened, as the EU has a larger combined GDP than the US.
It's also not too surprising. For it's land area, the US is very sparsely populated, and 350m people are not going to have the same economic purchasing power as 1000m people, assuming the latter group can catch up in terms of infrastructure and technology with the former group.
Why is this story here? It should be posted to Digg and Reddit, home to all the people awaiting the Ron Paul Revolution and are posting stories about peak oil and the need to return to the gold standard.
Unless, of course, the content of this article is somehow going to influence your business plans or YC application or your Ruby or JavaScript code. (No, I didn't think so.)
Oh yes, lets parade out yet another rising Chinese menace story.
Are we counting the cities worth of empty condos in the Chinese GDP? How exactly did the IMF arrive at these numbers? Is there external confirmation of government stats?
There are definite signs that there's a bubble waiting to pop in China, just as it did in the US, so i view even analyses by the IMF with some skepticism if they're based on government reporting, given that the government of China has both the means and the incentive to present itself as a growing economic power.
How about we hold off on the sound and fury until 2016, mmkay?
Right now, oil and commodities are transacted in US dollars so countries have to stock-pile dollars. When China becomes the dominant economy, this won't probably won't be the case for long.
We would remain, however, the most technologically advanced nation. Plus, GDP per capita would remain far higher. The majority of economists consider GDP per capita the most important thing when determining the wealth of a nation.
Unlike most other commenters here, I like this article and the general premise. I would be surprised if GDP in China increased so rapidly without also impacting PPP multiples, though. The article was a little light on this angle, but I would mentally adjust their number out to take into account the likely fact that increased GDP in China will continue to drive cost of living up. This pushes out the date a bit.
Yes, America has the worst economic system there is except for all the others that have been tried.
China? You GOT to be kidding! They are run by a one party dictatorship. They run essentially a centrally directed, command economy. They are still so poor that on average they have a tough time even getting enough rice for their people.
So, starting from where they are, they can get a fantastic rate of growth basically borrowing science, technology, and finance from America. BUT: Once they quit crawling, get up on all fours, and start walking, then they will face the fact that they have some serious problems: (1) Total suckage for a constitution. (2) Similarly for their political and legal systems and human rights, e.g., little things like freedom of the press. (3) Next to nothing in 'democratic traditions'. (4) A lot of filthy air and water. (5) A population with a quite old average age.
So, once they are standing, their people will want to do things about (1)-(5). As a country, they will struggle. The struggles may become violent. On "One fine day" (I know, Japan, not China), they will get (1)-(4) solved; solving (5) will be harder.
Then they will be about where America was in, say, 1950. As they move ahead, actually to do better than America they will have to do well with things that are new, with pushing the envelope, with making progress on new ground. Then they will begin to see the enormous advantages of political freedom, freedom to cut new ground in our research universities, free enterprise, freedom of the press, freedom in art, guarantees of freedom from an oppressive government, etc. They will still have the problem of a population with too old average age and a bad ratio of people to land and natural resources.
Net, bet on the economy in China continuing to grow rapidly for some years, but don't bet on China actually beating America in any significant sense this century.
[+] [-] patrickk|15 years ago|reply
Japan tried to boost the economy with massive expenditures in it's infrastructure, to no avail. Compare that to China's approach of building high speed rail networks that get cancelled, and to build huge 'cathedrals in the desert' - cities that are overpriced by the government, who refuse to let the price to be dictated by the market (which is what would happen in a true capitalist system). The result is that most locals are priced out of the market. The reason that the cities are being built in the first place is to drive growth figures. Not having any oversight may result in some dramatic revelations about China's supposed growth in the coming years.
http://news.bbc.co.uk/2/hi/8691083.stm
http://www.bbc.co.uk/news/business-11748644
http://www.sbs.com.au/dateline/story/about/id/601007/n/China...
Related HN discussion:
http://news.ycombinator.com/item?id=2386584
EDIT: Added link
EDIT 2: Typos
[+] [-] SkyMarshal|15 years ago|reply
China has four times the population of the US. They're already the world's second largest economy based on the development of about 350-400 million people in the eastern section of the country alone, and they still have another ~800 million to go spread through the rest of the country. While there are significant obstacles to further developing countries the size of China and India, they have untapped potential left that Japan didn't.
General comparisons to Japan aren't valid here.
[+] [-] mixmax|15 years ago|reply
America is clearly overreaching at the moment.
[+] [-] thewisedude|15 years ago|reply
[+] [-] foobarbazetc|15 years ago|reply
Additionally, the average Chinese person is beyond capitalistic. China is hyper-capitalist, if anything. And no other country needs to look after 1.3B people, so China is essentially the first experiment in government for a population of that size.
China's going to become the world's largest economy -- there's essentially no doubt about this. Americans need to get used to not being #1 anymore. I know it's hard to swallow. :)
The world is going to look very, very different in 10 years.
[+] [-] Cherian_Abraham|15 years ago|reply
However this does present serious doubts about the irrational exuberance in the strength of our markets for long term. It is hard to gauge China and its intentions. I am not saying that US has moral supremacy over China, but that China seems to be doing now what US used to do, for its own stability sake, twenty years ago. It is preparing to be the economic behemoth, despite the troubles it face in real estate and regionally.
The next twenty years should be pretty interesting.
Edit: I wanted to add a reference to this paper out of the Pentagon from two Pentagon top level staffers who assert that we should reduce our military spending and reinvest it in our youth. A very prescient analysis of where United States is heading, in the world. I wanted to add it as its own HN submission, but was not sure if it would be well received. Here is the link to the pdf: http://www.wilsoncenter.org/events/docs/A%20National%20Strat...
[+] [-] espeed|15 years ago|reply
[+] [-] keiferski|15 years ago|reply
So we won't be the top any longer, but we'll still be enormously dominant. So? Competition drives innovation.
All the "America is doomed" folks act as if America is going to crumble to pieces simply because we are no longer the only gorilla in the room.
[+] [-] mike-cardwell|15 years ago|reply
The rest of the World doesn't need that complication.
[+] [-] kokon|15 years ago|reply
Once you're the second, you can't easily dictate anything anymore. Just like having multiple buyers, the seller has more options to sell the product.
[+] [-] oostevo|15 years ago|reply
These benefits are, in essence, virtuous cycles that give the superpower a advantages on the world stage just by virtue of already being in first place. Think of it like compound interest, or a really big ball in Katamari Damacy, only for geopolitical power. That is, the US can arrange things in its favor to make it more powerful just because it's already quite powerful and no other country is.
As an example, the United States Dollar is the de-facto reserve currency for the rest of the world. That means that the US can purchase things without having to first go through (expensive) currency exchange, giving the US an economic advantage. The reserve currency status is also a major factor that also allows the US to borrow money pretty much at will.
Similar arguments can be made about cultural, military, diplomatic, and other power.
That means that countries aspiring to be the superpower have the deck stacked against them. So when, despite this, China overtakes the US, the US will have an awful lot of catching up to do. It's not fighting for food in the streets, but it would be a fairly serious blow to the US.
[+] [-] haploid|15 years ago|reply
[deleted]
[+] [-] Florin_Andrei|15 years ago|reply
Kind of tongue-in-cheek - but that's a lesson I learned from playing Civilization. I know it's just a game, yadda yadda, but sometimes I do wonder how much of it translates into reality. E.g., if this was a game of Civ, China's domination would be pretty much ensured at this point: they have so many "cities" that their "production" output and "science" output will overtake anyone else's in short order.
In fact, that's how I prefer to play the game often: just build minimal defenses to make sure my cities are not conquered, and invest in growth as much as possible. Sooner or later, I'm the 800 kg gorilla of the whole Civ map.
[+] [-] doyoulikeworms|15 years ago|reply
From what I remember, the overhead of high city counts in IV can be prohibitively high. It makes more sense to scale vertically rather than horizontally. Unless, of course, you employ the State Property civic (apt!). Interestingly, China has been switching to the Free Market civic for the last couple of decades... More trade routes and more incentive to support corporations, but higher overhead for the huge city count. There's a reason why you go through revolution when you change civics.
[+] [-] tlear|15 years ago|reply
[+] [-] allenp|15 years ago|reply
[+] [-] yxhuvud|15 years ago|reply
[+] [-] weavejester|15 years ago|reply
Technically this has already happened, as the EU has a larger combined GDP than the US.
It's also not too surprising. For it's land area, the US is very sparsely populated, and 350m people are not going to have the same economic purchasing power as 1000m people, assuming the latter group can catch up in terms of infrastructure and technology with the former group.
[+] [-] billybob|15 years ago|reply
[+] [-] edw|15 years ago|reply
Unless, of course, the content of this article is somehow going to influence your business plans or YC application or your Ruby or JavaScript code. (No, I didn't think so.)
Butterfly flaps wings
Adjust your business model
The U.S. is doomed
[+] [-] knowtheory|15 years ago|reply
Are we counting the cities worth of empty condos in the Chinese GDP? How exactly did the IMF arrive at these numbers? Is there external confirmation of government stats?
There are definite signs that there's a bubble waiting to pop in China, just as it did in the US, so i view even analyses by the IMF with some skepticism if they're based on government reporting, given that the government of China has both the means and the incentive to present itself as a growing economic power.
How about we hold off on the sound and fury until 2016, mmkay?
[+] [-] espeed|15 years ago|reply
See this discussion from yesterday -- "Petrodollar Warfare -- AKA the "Oil Currency Wars" (http://news.ycombinator.com/item?id=2477659)
[+] [-] mattee|15 years ago|reply
[+] [-] reso|15 years ago|reply
Still, probably a good time to start learning the ol' Mandarin.
[+] [-] vessenes|15 years ago|reply
[+] [-] vorg|15 years ago|reply
[+] [-] NY_USA_Hacker|15 years ago|reply
China? You GOT to be kidding! They are run by a one party dictatorship. They run essentially a centrally directed, command economy. They are still so poor that on average they have a tough time even getting enough rice for their people.
So, starting from where they are, they can get a fantastic rate of growth basically borrowing science, technology, and finance from America. BUT: Once they quit crawling, get up on all fours, and start walking, then they will face the fact that they have some serious problems: (1) Total suckage for a constitution. (2) Similarly for their political and legal systems and human rights, e.g., little things like freedom of the press. (3) Next to nothing in 'democratic traditions'. (4) A lot of filthy air and water. (5) A population with a quite old average age.
So, once they are standing, their people will want to do things about (1)-(5). As a country, they will struggle. The struggles may become violent. On "One fine day" (I know, Japan, not China), they will get (1)-(4) solved; solving (5) will be harder.
Then they will be about where America was in, say, 1950. As they move ahead, actually to do better than America they will have to do well with things that are new, with pushing the envelope, with making progress on new ground. Then they will begin to see the enormous advantages of political freedom, freedom to cut new ground in our research universities, free enterprise, freedom of the press, freedom in art, guarantees of freedom from an oppressive government, etc. They will still have the problem of a population with too old average age and a bad ratio of people to land and natural resources.
Net, bet on the economy in China continuing to grow rapidly for some years, but don't bet on China actually beating America in any significant sense this century.
[+] [-] haploid|15 years ago|reply
[deleted]
[+] [-] wiks|15 years ago|reply