Wednesday, March 29, 2006

The Rise of China

Russel Roberts at Cafe Hayek writes about the non-objectionable nature of the rise of China as wealthy economic power:
A lot of people are worried about China as an economic threat to the United States. I'm not. China's economic success is good for Americans. When Americans buy toys and clothes and iPods made in China it means that we have more people and capital available to make other things.

A variation on the Chinese threat is that someday, if they keep growing, they'll pass us. This is the view that economics is like the Olympics. If you don't finish first, you're stuck with the bronze or silver medal or worse, you don't even get to the medal stand. But economic success is not like the Olympics. It's not a zero sum game. I care about my children's opportunity to live a fully human live, choosing to use their skills as they see fit. A successful China enhances that. I hope China does great in the meanwhile. The Chinese are desperately poor. Who would be so heartless as to hope that they stay that way?

... I am deliberately ignoring China as a military threat. Some people argue that China isn't just competing with us economically, but militarily. Could be that China has militaristic and territorial ambition, whatever that means. On military grounds, it would matter if China is really, really, rich. That's because military competition is a zero sum game. Winning a war usually means that the other side loses. And being rich might make China a more potent military threat. But I actually would argue that Chinese economic growth reduces the chance of military conflict. The more we trade with them and the more our people's interact economically, the less likely we are to fight a war with them.

Roberts may well be right that a rich China is a China we're less likely to go to war with. I think the last time I checked out the CIA's site, I learned that Langley is of the opinion that China's GDP is already something like 2/3rds of the USA's in purchasing power parity (PPP) terms. Now, I know PPP comparisons aren't valid for all purposes, and I also know that China needs to feed and house a lot more people with its output than we do. Presumably this means, all things being equal, there's less money left over for a deep water navy and advanced weapons systems.

Still, by some measurements, China's economy is likely to be larger than America's in a short while -- perhaps in less than ten years. And some day in the not-too-distant future -- imagine in 30 years or so -- China's economy may well be a very good deal larger than America's.

This may not mean all that much to the average American or Chinese when that day arrives. And America is likely to remain a much richer nation than China for the forseeable future. Still, America is on the verge of no longer being the nation state with the largest economy. In my book that means in some ways (not necessarily miltarily) the US will no longer be the single most powerful nation state. I frankly have no idea what types of challenges this situation is going to bring to our future. And I'm quite sure there's not a thing America can do about it. But at the very least it's unsettling.

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