Carpe Diem

Despite China’s impressive growth, on a per capita basis, the US economy is still a century ahead of China

china

In a post this morning (“Sorry, China, the US is still the world’s leading economic power“) Jimmy Pethokoukis reported on a story in today’s Financial Times titled “China poised to pass US as world’s leading economic power this year.” Here’s a key excerpt of the FT story:

The US is on the brink of losing its status as the world’s largest economy, and is likely to slip behind this year, sooner than widely anticipated, according to the world’s leading statistical agencies. The US has been the global leader since overtaking the UK in 1872. Most economists previously thought China would pull ahead in 2019.

Here are some of Jimmy’s comments about the FT story:

Some important context here: on a per person basis, PPP GDP is $51,000 in the US vs. $11,000 in China. Anyway you slice the data, China is still a much poorer nation than America. (More than 30 million Chinese, basically the population of Texas, live in caves.) And at market rates, the US economy is about twice as large as China’s. Also note that within two decades or so, China will have an older population than the United States. The Middle Kingdom has become old before it has become rich. In addition to demographic problems, China is still trying to transition to a sustainable, consumer-driven growth model. So the other team has its problems, too.

Now here is what the FT’s headline, “China poised to pass US as world’s leading economic power this year,” really gets wrong. The US remains the world’s leading economic power due to its technological innovation. Most global innovation surveys put the US at or near the top. For instance, the World Economic Forum ranks the US as the 7th most innovative economy, China the 32nd. Bloomberg puts the US at third, while China did not make the top 30. And which global economy is most critical to expanding the technological frontier, say, Sweden, Bloomberg’s #2 ranked economy with a population of 9.5 million and a $400 billion economy, or the #3 US with its 315 million people and $16 trillion economy. Pound for pound, no nation innovates like America. It’s our deep magic, and a competitive advantage we should be careful not to squander.

MP: The chart above adds some additional context to the FT’s claim that China will overtake the US this year as the world’s leading economic superpower. Displayed above is real GDP per capita in the US (in 2013 dollars), on an annual basis back to 1800, using historical data from Global Financial Data (subscription required). According to the International Monetary Fund, per capita GDP in China last year reached $6,747, which was a level of economic output per capita that was first reached in the US back in 1882, more than 130 years ago. Adjusting for purchasing power in China to make a more accurate comparison between output levels per capita in the US and China, the IMF data show that China’s per capita GDP (PPP) last year was $9,844, which was the level of economic output per person first reached in the US back in 1912, more than a century ago. Even if China’s per capita GDP continues to grow at say 7% for the next three years, it would still only reach the equivalent level of America’s output per capita in 1939. And even if China’s output per person grew at 7% for the next decade, it would still only be at a level the US reached in 1951.

Bottom Line: Yes, it’s true that China has made phenomenal economic gains over the last several decades to become the second largest economy in the world, and it’s true that China will probably surpass the US to become the world’s largest economy this year based on economic output. But adjusted on a per-capita basis, America’s output is still a full century ahead of China, and it could take many decades of economic growth in China before it even comes close to approaching the level of per-capita GDP that the US reached fifty years ago. Before breaking out the champagne and cigars for China’s status as the “world’s leading economic power,” let’s keep it all in perspective!

65 thoughts on “Despite China’s impressive growth, on a per capita basis, the US economy is still a century ahead of China

  1. Prof. Perry,

    Two key points :

    1) A lot of anti-US media unsavvies will use PPP instead of Nominal GDP, to show China larger than the US, and India larger than Japan. Nominal is what matters, because companies earn revenue in nominal terms.

    An iPad’s price does not get slashed by two-thirds when it sells in India or China.

    2) The US may be a century ahead, but China’s growth rate is higher than the US’s was to get to that point. So China is (for now, at least) advancing 2-3 years worth per year. This won’t continue forever, though.

    3) The most important point :

    ALL the things we see about government corruption, anti-productivity legislation, ‘feminism’, etc. is merely due to one thing : insufficient competition for the US.

    Any anti-productivity groups or government graft-seeking is due to overseas competition not being stiff enough, that such fat can even creep into the US economy.

    The rise of China is good, in that it will force America to shed anti-productivity that it currently sustains. When America is forced to become more competitive, America will become better again.

    Most of America’s present problems are due to insufficient international competition to jolt us out of complacency. The Western Nations are a cartel of socialism, ‘feminism’, and other such garbage that are luxuries of those who don’t have to be competitive.

    • Toads,

      The rise of China is good, in that it will force America to shed anti-productivity that it currently sustains.

      So Al Sharpton, Al Gore, community organizers, Marxist professors, government bureaucrats, welfare bums, etc. will suddenly find productive work?

      Not likely. I say they ride the taxpayers all the way over the cliff.

    • ‘A lot of anti-US media unsavvies will use PPP instead of Nominal GDP, to show China larger than the US, and India larger than Japan. Nominal is what matters, because companies earn revenue in nominal terms.”

      i think you are getting some terms and concepts confused here.

      nominal is not what matters. real is what matters.

      if you have 2 dollar based economies that each produce 10 identical cars, but one sells them for $20k and the other for $30k, the two are the same size (productively) despite the second being 50% larger nominally.

      this is why GDP is generally reported in real terms.

      nominal can mistake inflation for an increase in output.

      PPP is a way to get nominal income levels to be comparable in real terms.

      the cost of the same items varies enormously from place to place.

      earn $100k a year in detroit, and you can buy a great deal of stuff and own your own home. earn it in san francisco, and you’re going to have roomates.

      big jumps in nominal gdp or income do not necessarily tell you anyhting about how many actual items were produced or what your purchasing power (in actual goods and services) is.

      • nominal is not what matters. real is what matters.

        Wrong. We are talking about nominal vs. PPP.

        Not the nominal (pre-inflation) vs. real (post-inflation). ‘Real’ has no place here.

        The word ‘nominal’ is opposed by both ‘real’ and PPP. This is a discussion of PPP vs. Nominal. Not the ‘real’ (inflation-adjusted) calculation, which is off-topic.

        That is why MJPerry’s original article mentions both (see the two red lines. The later one for 1912 is PPP, which is the inferior metric).

        • Toads

          Reread morg’s comment.

          ““PPP is a way to get nominal income levels to be comparable in real terms.”

          That may be a short sentence, but it’s one of the most important ones in the whole comment.

          A Big Mac is pretty much the same worldwide, so It can be used as a measuring stick of different currencies all over the world – in REAL terms.

          A person earning 100 Big Macs a week in country A is earning the same wage as a person earning 100 Big Macs per week in country B. They have Purchasing Power Parity.

          • “Wrong. We are talking about nominal vs. PPP.”

            neither of which you seem to understand.

            nominal is not a good measure of either unit output or of unit purchasing power and thus, well being.

            when one is measuring the actual ability of people to purchase goods and services, PPP is the superior metric (at least when discussing income. per capita gdp can be a misleading proxy for median income, especially in a state with high government spending or lots of nationalized industries)

            nominal is sloppy and can mean inflation and high price levels, not prosperity.

            would you rather earn $50 k in a country where a honda costs $50k (like denmark) or earn $40k in one where it costs $25k (like the us)?

            without taking price levels into account, one cannot normalize and compare output of purchasing power.

            you do not seem to understand how these figures work.

            gdp is ALREADY a real number. it is NOT nominal. there are no nominal figures on that graph.

            you may want to brush up on your terms here.

        • “That is why MJPerry’s original article mentions both (see the two red lines. The later one for 1912 is PPP, which is the inferior metric).”

          actually, no, it does not.

          look at the chart again.

          note the top where it says “real gdp per capita”.

          it has no nominal figures in it, only real figures.

    • Nominal is what matters, because companies earn revenue in nominal terms.

      No. No they do not. They earn it in real terms. Companies are affected by inflation, too.

    • I like your third reason. I have believe for a long time that many of the so called issues of the day means that we have much to much time on our hands.

  2. The U.S. is quickly becoming a Third World country. One need only look at trends in California to see our future.

    For all practical purposes the U.S. will cease to exist by 2050 and China’s relative standing will improve as the U.S. succumbs to the “fundamental transformation” currently being imposed upon us by our ruling class.

      • Paul

        Well sure, but at least the libertarian “right to travel” will be fully enshrined as we regress to the mean.

        World = fixed pie?

        • Ron,

          Strange, my comments are not getting through. Let me try again..

          “World = fixed pie?”

          Not sure what to do with that. As Che said, see California, where 1/3 of the nation’s welfare recipents reside.

          • Paul

            I think everyone is having trouble posting comments. Perhaps Prof. Perry is trying to limit comments so he won’t get one of those pesky “Most Popular Blog” awards. :)

            My fixed pie comment referred to your “revert to the mean” comment. We don’t automatically get poorer as others get richer.

            As Che said, see California, where 1/3 of the nation’s welfare recipents reside.

            Yes, there’s that word again – welfare. It seems to be at the root of a lot of problems.

          • Ron,

            My fixed pie comment referred to your “revert to the mean” comment. We don’t automatically get poorer as others get richer.

            Oh, I agree with that. But we won’t get richer by importing poverty, either. The pie might grow a bit overall, but it’s the size of the slices that should matter to the individual.

            Yes, there’s that word again – welfare. It seems to be at the root of a lot of problems.

            So better to have less of the type who receive it and vote for more of it.

          • Facts are stubborn things and this one will not go away: When America has the demographics of California, it will also have the politics, economic policy and taxes of California: the principal features of which include a massive over-privileged public bureaucracy, skyrocketing taxes, an exodus of business, and a beleaguered private sector middle class in precipitous decline or outright flight.

            http://www.americanthinker.com/2012/11/the_gops_california_lesson.html

          • Paul

            So better to have less of the type who receive it and vote for more of it.

            heh! Yeah, so instead of taking away the punch bowl, let’s work frantically to stop all those people who are rushing toward it with their cups in their hands.

          • Ron,

            How are you going to take it way when theyare the ones demanding the taxpayers provide the punch bowl in the first place? Why on earth would we want more of them? That pie you mentioned is not fixed, it’s getting eaten. That’s the reality we could have avoided with a strong enough fence and a smart immigration policy.

          • Paul

            Sooner or later the taxpayers will stop paying taxes. Sooner works better for me.

            Mmmm, pie and punch.

            OK, that’s it for now. Time for dinner. :)

            Sooner or later

          • Ron,

            “Sooner or later the taxpayers will stop paying taxes.”

            Pretty grim way of fixing the problem. Would have been wise to keep out as many tax eaters as possible. Less painful in the long run.

          • Paul

            Pretty grim way of fixing the problem. Would have been wise to keep out as many tax eaters as possible. Less painful in the long run.

            Illegal immigrants are a pimple on the ass that is the welfare state. They can’t legally vote for more punch and can’t legally get full cups of punch but only shots of it.

            (Is that the mixed metaphor of the day, or what?)

            If they are voting and getting benefits they aren’t entitled to, then we have yet another problem to deal with: A much larger problem with the system in general.

            I think if you look objectively at the number of dollars going to non-citizens you find they are a small percentage of the total drain on our wallets. Let’s fix the whole problem, not just a small part of it.

            You are tearing your hair over a boil instead of looking at the ugly ass it’s on.

          • Ron,

            Illegal immigrants are a pimple on the ass that is the welfare state. They can’t legally vote for more punch and can’t legally get full cups of punch but only shots of it.

            I wouldn’t say pimple on the ass, especially regarding the cost of health care and ripple effect of displacement and wage pressures, but we’re not just talking about illegals either. We’re talking about their kids who are American citizens because of birthright citizenship. We are talking about their descendents who stagnate several generations in, never making up the “gap” that has caused so many trillions of tax dollars to be flushed down the toilet. We are talking about legal immigrants, about a million of them a yr, the majority end up on welfare.

            Most of these people eventually end up voting for one reason or another. And they vote for ruinous policies. Take a look at California’s demographics for reference. Read the Amer Thinker piece I linked and see who voted for Prop 30 in the California that used to be famous for anti-tax initiatives.

            Again, all this could have been avoided if we had a smart immigration policy where high IQ people like my wife could easily get in vs. the illiterate ditch digger who just traipsed across the border. Canada has a points based system of immigration. They also recently passed the US in median income. While there are many factors at play, I don’t think that’s entirely a coincidence.

          • Paul

            I wouldn’t say pimple on the ass, especially regarding the cost of health care and ripple effect of displacement and wage pressures

            I realize I’m picking out just a little piece of this, but if you’re concerned that low cost labor is hurting American workers, then to be consistent, you must also oppose technology that displaces workers and favor restrictions on off-shoring and imports.

            We, as consumers, are always better off paying the lowest price we can for a good or service, all else equal. we know that intuitively because we shop for the lowest price. where that lowest priced good or service comes from shouldn’t concern us. If it does, we are free to pay more for something “made in USA” or hand made, or whatever it is we think important enough to pay a higher price for.

            but we’re not just talking about illegals either…[]…about a million of them a yr, the majority end up on welfare.

            There’s that word again, at the bottom line.

            Read the Amer Thinker piece I linked and see who voted for Prop 30 in the California that used to be famous for anti-tax initiatives.

            Yes, I read it. Prop 30 was a pet project of the teacher’s unions. It would have passed with or without the hispanic vote. the American Thinker article, like you, boils everything down to the welfare system. Every troublesome path begins and ends there.

            It’s doesn’t take much of a stretch to imagine refusing to pay taxes. Those thugs can’t put everyone in jail. And if they can, at least we’ll be cared for by the state.

          • Ron,

            then to be consistent, you must also oppose technology that displaces workers and favor restrictions on off-shoring and imports.

            Nah, far less downside in those instances.More winners than losers. If I import a new blender, I can just chuck it when it breaks – not many externalities. That blender isn’t going to join a gang, or cost me more in the back-end when he spawns multiple blender children that proceed to flunk out of school but are still eligible for special blender affirmative action.

            We, as consumers, are always better off paying the lowest price we can for a good or service, all else equal.

            Right. All else equal. But if someone invents a labor saving device that gives everyone within a 20 mile radius cancer, should we not look at the side effects? Or should we only consider the consumer point of view?

            at the bottom line.

            The bottom line is why the hell are we flooding the country with people who have so little human capital that they are eligible for it? Especially when the US is still a magnet for people all over the world who actually have skills to offer right now.

            It’s doesn’t take much of a stretch to imagine refusing to pay taxes. Those thugs can’t put everyone in jail. And if they can, at least we’ll be cared for by the state.

            So you’re talking about an economic collapse, which will be rather unpleasant. A border fence and a points based immigration policy would have been far more palatable for those of us who don’t relish the idea of riots and bread lines throughout the land.

          • Paul

            Nah, far less downside in those instances.More winners than losers. If I import a new blender, I can just chuck it when it breaks – not many externalities.

            Maybe I wasn’t clear. My point wasn’t about products, but about labor. If you complain that unskilled immigrants are lowering wages for unskilled American workers by their willingness to work for less, then you must also complain that technology and off-shoring are also driving down those wages for unskilled workers. I haven’t heard you object to off-shoring or technology which have the same effect on unskilled wages.

            Right. All else equal. But if someone invents a labor saving device that gives everyone within a 20 mile radius cancer, should we not look at the side effects? Or should we only consider the consumer point of view?

            We could let the consumers decide, as they or someone they know are the ones at risk from cancer. Or we could prevent the cancer by eliminating it’s source in Washington, DC, and all State capitols.

            The bottom line is why the hell are we flooding the country with people who have so little human capital that they are eligible for it?

            I have no idea why, I only know how it’s done – by laying out a free smorgasbord.

            Especially when the US is still a magnet for people all over the world who actually have skills to offer right now.

            Let the labor market decide. No government intervention is required, in fact government intervention invariably results in unintended consequences, and most often does more harm than good.

            So you’re talking about an economic collapse, which will be rather unpleasant.

            I’m talking about a government collapse. No reason you and I can’t continue doing business, even if the county health inspector isn’t getting paid, and his county car is out of gas.

            A border fence and a points based immigration policy would have been far more palatable for those of us who don’t relish the idea of riots and bread lines throughout the land.

            There may be riots, but there won’t be bread lines, because there won’t be any government bread or government employees to hand it out, unless they choose to work for free, handing out vouchers for future bread.

            What, riots in front of that empty City Hall? Or maybe the empty State capitol?

            Those of us who feel compassion for those in real need could volunteer our time and money to help them through private charities.

            Look, Paul, I’ll make you a deal: try it my way first – eliminate the welfare system – and if that doesn’t produce every benefit I’ve promised, and eliminate every problem you have with immigrants, I and my grandson will be right over to help you build that fence.

          • Ron,

            Maybe I wasn’t clear. My point wasn’t about products, but about labor.

            Sure, but my point was about externalities.

            We could let the consumers decide, as they or someone they know are the ones at risk from cancer. Or we could prevent the cancer by eliminating it’s source in Washington, DC, and all State capitols.

            I wouldn’t trust the idiocracy to gamble with the lives of my loved ones. I don’t really believe you would either.

            I have no idea why, I only know how it’s done – by laying out a free smorgasbord.

            Well then best to try and mitigate the damage any way possible.

            Let the labor market decide. No government intervention is required, in fact government intervention invariably results in unintended consequences, and most often does more harm than good.

            This is one of those areas where I think libertarians are absolutely suicidal. It’s indisputable the country would be better off with a large population of smart workers from all over vs. a population of dipshits, leeches, layabouts, and criminals who have the advantage of being able to just walk across the border.

            I’m talking about a government collapse. No reason you and I can’t continue doing business, even if the county health inspector isn’t getting paid, and his county car is out of gas.

            And you don’t think that won’t spill over into the private sector? You think the bureaucratic parasites are going to just sit back and give up their phony baloney jobs while they have the full force of government on their sides? How about all the businesses that have government contracts losing that business all at once? LIke I said, such a scenario would be extremely ugly.

            What, riots in front of that empty City Hall? Or maybe the empty State capitol?

            Or in your nicely manicured neighborhood where the Obama voters know you are stocked up.

            Look, Paul, I’ll make you a deal: try it my way first – eliminate the welfare system – and if that doesn’t produce every benefit I’ve promised, and eliminate every problem you have with immigrants, I and my grandson will be right over to help you build that fence.

            Of course I’d love to eliminate the welfare state. That would be better than what we have now. It would help, but it’s hard to say how much it would stop the flow of the unskilled into the country, especially now that huge communities of non-assimilated immigrants have been built up. And once you get rid of it, how do you stop them from voting it back in pronto?

            Also, just spitballing here, but elimination of the welfare state could cause wages to rise in areas like agriculture, which would be a good thing on the one hand because the peasant labor lobby would have to pay it out on the front end vs. their current sweet deal of offloading costs to you and me on the back end. However, higher wages would also be a lure from across the border. So, axing the welfare state might not stem the tide either.

          • Paul


            Paul | May 2, 2014 at 5:48 pm

            Ron,

            Sure, but my point was about externalities.

            Immigrants coming to the US is an externality of the welfare state.

            I wouldn’t trust the idiocracy to gamble with the lives of my loved ones. I don’t really believe you would either.

            I don’t see how this analogy applies to the subject of immigrants and the welfare state, and I don’t know where to go with it. We seem to have gotten away from the labor discussion.

            Well then best to try and mitigate the damage any way possible.

            Nah, don’t nibble around the edges, strike it at the root.

            This is one of those areas where I think libertarians are absolutely suicidal. It’s indisputable the country would be better off with a large population of smart workers from all over vs. a population of dipshits, leeches, layabouts, and criminals who have the advantage of being able to just walk across the border.

            Paul, those dipshits, leeches, layabouts, and criminals come for the freebies. Those who come hoping to better their lives by working in the land of opportunity need jobs, which necessarily depends on the labor market. There isn’t unlimited demand for unskilled labor. They will either stay home or return home when they can’t find work they can live on, just as immigrant engineers and doctors would when there aren’t enough jobs. You won’t find skilled professionals willing to pick lettuce until an opportunity opens up for them in their preferred line of work.

            In no case would less welfare money to immigrants mean less comes out of our pockets. It would just go to other undeserving people.

            And you don’t think that won’t spill over into the private sector? You think the bureaucratic parasites are going to just sit back and give up their phony baloney jobs while they have the full force of government on their sides? How about all the businesses that have government contracts losing that business all at once? LIke I said, such a scenario would be extremely ugly.

            Yes it would. At some point though, it’s less ugly than the alternative. The full force of government requires some degree of consent, and there must be people willing to keep doing their jobs without pay.

            Hell, I would consider adopting a government (ex)worker if they promised to quit doing that government job and look for something else.

            Or in your nicely manicured neighborhood where the Obama voters know you are stocked up.

            Heh! They should also be aware, or they would soon find out that my neighbors and I are bigtime 2nd amendment fanboys.

            Of course I’d love to eliminate the welfare state. That would be better than what we have now.

            The welfare state is the root of all evil.

            It would help, but it’s hard to say how much it would stop the flow of the unskilled into the country…

            There are only so many jobs of any kind, including unskilled jobs, available at any time. Unskilled workers won’t flow anywhere they have no hope of working and living, just as you and I don’t move to places where there are no jobs. (well, I might. I don’t need a job)

            …especially now that huge communities of non-assimilated immigrants have been built up. And once you get rid of it, how do you stop them from voting it back in pronto?

            If we were able to get rid of the welfare state, that would mean the opposition is powerless to prevent it. They would also be powerless to vote it back in.

            Also, just spitballing here, but elimination of the welfare state could cause wages to rise in areas like agriculture, which would be a good thing on the one hand because the peasant labor lobby would have to pay it out on the front end vs. their current sweet deal of offloading costs to you and me on the back end. However, higher wages would also be a lure from across the border. So, axing the welfare state might not stem the tide either..”

            I think an increase in the supply of labor due to former welfare recipients looking for work would lower the wages in ag.

  3. And here we can see how capital enhances labor, not replaces it.

    China is a very labor-intensive economy vs the US, which is a very capital-intensive one.

    • It replaces it too: how many people do you know who wash their own clothes or make a living doing it? You see people washing clothes by hand all the time in developing countries. And in a time of extremely rapid technological change when revolutionary new technology is being spread throughout the economy, whether electricity and mechanization before the great depression or the computer and internet for the last couple decades, technology can destroy labor a lot faster than we can replace it.

      Of course, we eventually figure out new forms of “labor,” often much more pleasant work, to trade with each other and boom times come again, while becoming much richer from the new tech in the process. But let’s not pretend that there isn’t a substitution process that can temporarily leave more out of work.

      As for China, what a joke, as you say. Let me know when baidu or alibaba are able to compete internationally, as opposed to most Chinese biggies simply building giant factories full of manual laborers. As Toads says, there is no competition for the US, because of all those countries’ domineering govts and lack of an open society. Of course, O-bum-a and gang are trying to hamstring us down to their level, but we have a long way to go to stoop down there.

      That said, the global landscape for business is completely changing. It was big news recently that a kid in Vietnam was making $50k/day in advertising off his mobile game. It is fairly straightforward for smart people with internet access to collaborate virtually from all over the world to build information products, the most valuable products these days. It is only a matter of time before the workforce goes truly global, with ad-hoc decentralized teams all over the globe doing most of the work. The competition borne out of that transition will bring all existing companies to their knees.

      • Of course, we eventually figure out new forms of “labor,” often much more pleasant work, to trade with each other and boom times come again, while becoming much richer from the new tech in the process.

        That’s what “enhances” means. I’m not pretending that there isn’t a transition period. Rather, I’m just skipping right over it.

        People often complain about how robots/foreigners/whatever are taking our jobs, that trade and capital somehow makes us worse off. That simply isn’t true.

        It takes 1 billion people to do in China what the US can do with 313 million. It takes the EU 500 million people to do what the US can do with 313 million. That is why we are so much richer than both those areas.

        It’s not about labor. It’s about improvement.

  4. China’s per capita numbers don’t capture the reality of China, which is that hundreds of millions of Chinese now have middle class and upper middle class incomes, as measured by American standards, even as hundreds of millions of other Chinese are still living in rural poverty.

  5. Each level of analysis has value. The U.S. is far more advanced than China, however, being able to act as a single economic and political bloc has important advantages in trade.

    • Z: “Each level of analysis has value. The U.S. is far more advanced than China, however, being able to act as a single economic and political bloc has important advantages in trade.

      Advantages for whom?

      • Generally, the larger the trading bloc, the more trade is possible. Think Marco Polo.

        Generally, the larger the trading bloc, the more influence on trading conditions. Think the Commonwealth of Nations.

        • Z: “Generally, the larger the trading bloc, the more trade is possible. Think Marco Polo.

          Generally, the larger the trading bloc, the more influence on trading conditions. Think the Commonwealth of Nations.

          That isn’t an answer to our question. Who, specifically benefits from large trading blocs? What group of people?
          And why would people need government permission to trade with others?

          • Ron H: Who, specifically benefits from large trading blocs? What group of people?

            China.

            Ron H: And why would people need government permission to trade with others?

            Because, Ron H, in the real world, there are governments, and governments regulate the flow of people and goods across their borders. They do so for a number of reasons, including security. Trading blocs set up trade rules to facilitate trade by creating a stable, predictable environment.

          • Z: “China.”

            China is a country – a political and geographic concept. as such, the notion of “benefits” doesn’t apply. Only people can benefit.

            Do you mean everyone living in China benefits from restricting global trade? It seems that the Chinese government currency policies hurt Chinese people by making imports more expensive for them. Who are those people who benefit?

            Because, Ron H, in the real world, there are governments, and governments regulate the flow of people and goods across their borders.

            They certainly do! Sharp observation. For whose benefit do governments do that?

            They do so for a number of reasons, including security.

            Maybe you can explain that one.

            Trading blocs set up trade rules to facilitate trade by creating a stable, predictable environment.

            Rules? Do you mean to tell us that people can’t arrange for mutually beneficial exchanges with others without government rules? Marco Polo traveled between two seperate worlds with no common rules or agreements of any kind, exchanging what each valued less for what they valued more. Where were the government rules and trade blocs?

          • Ron H: China is a country – a political and geographic concept. as such, the notion of “benefits” doesn’t apply. Only people can benefit.

            That’s like saying a corporation can’t show a profit. Your question was “What group of people”. China is a group of people.

            Ron H: Do you mean everyone living in China benefits from restricting global trade?

            Most people in China benefit from open trade, first in the bloc known as China, and through international trade agreements.

            Ron H: They certainly do! Sharp observation. For whose benefit do governments do that?

            As democracies restrict movement across borders, just as non-democracies do, apparently most people think it is for their own benefit. We already mentioned security.

            Ron H: Maybe you can explain that one.

            Well, we start with stopping invading armies. Countries go to war. They often settle wars by setting borders.

            Ron H: Rules? Do you mean to tell us that people can’t arrange for mutually beneficial exchanges with others without government rules?

            Governments facilitate the setting of rules.

            Ron H: Marco Polo traveled between two seperate worlds with no common rules or agreements of any kind, exchanging what each valued less for what they valued more.

            Marco Polo could travel from Italy to China because the Mongols had unified the territory, minimized banditry, and encouraged travel. When the Mongol Empire fell, it cut off direct trade between Italy and China.

          • Z: “That’s like saying a corporation can’t show a profit.

            No, it’s not like that at all. Members of a corporation have voluntarily joined together for a common interest and give themselves a name and a unified structure. People join and un-join freely, as it should be.

            Countries, especially authoritarian ones like China, are not voluntary members only entities.

            Your question was “What group of people”. China is a group of people.

            So you are saying that everyone included in that group “China” benefits from China’s trade policies? You know that’s not true.

            You use words carelessly.

            Most people in China benefit from open trade, first in the bloc known as China, and through international trade agreements.

            You can’t use the terms “open trade” and “international trade agreements” in the same sentence.

            And we know that China doesn’t have open trade. Government controls the currency exchange rate to keep export prices low and import prices high.

            Chinese people get less then free market prices for their exports and pay more than free market prices for their imports. Guess again.

            As democracies restrict movement across borders, just as non-democracies do, apparently most people think it is for their own benefit. We already mentioned security.

            Borders are a hinderance to trade, not a benefit.

            Well, we start with stopping invading armies. Countries go to war. They often settle wars by setting borders.

            Yes. Countries go to war. People seldom do unless aroused to a feverish pitch of nationalistic outrage by their governments. Invading armies and borders interfere with mutually beneficial exchanges of goods and services. Governments controlling trade among themselves is a hindrance to trade, not a benefit.

            Governments facilitate the setting of rules.

            A non sequitur. We asked why you thought rules were necessary.

            Marco Polo could travel from Italy to China because the Mongols had unified the territory, minimized banditry, and encouraged travel. When the Mongol Empire fell, it cut off direct trade between Italy and China.

            All without any government trade agreements between Italy and China. Imagine that. We are completely in favor of making travel easier and safer, as it facilitates trade, but the subject is *trade agreements* between and among governments.

            Try to stay on topic.

          • Ron H: Countries, especially authoritarian ones like China, are not voluntary members only entities.

            That’s immaterial to your question. You asked what group of people benefited from open trade.

            Ron H: So you are saying that everyone included in that group “China” benefits from China’s trade policies?

            No, we said “Most people in China benefit from open trade”.

            Ron H: You use words carelessly.

            We said “Most people in China benefit from open trade”. You use words carelessly.

            Ron H: You can’t use the terms “open trade” and “international trade agreements” in the same sentence.

            Openness is not a binary quality, otherwise you could not draw a distinction between the borders of the U.S. and the borders of N.K.

            Ron H: And we know that China doesn’t have open trade.

            China is a trading bloc. People within China can trade relatively freely with others within that bloc.

            Ron H: Borders are a hinderance to trade, not a benefit.

            As borders are a necessity of security, rules for trade across borders are essential to expanding trade networks.

            Ron H: Countries go to war. People seldom do unless aroused to a feverish pitch of nationalistic outrage by their governments.

            People are more than capable of arousing themselves. People go to war. There’s pictures and everything.

            Ron H: All without any government trade agreements between Italy and China.

            No. But there was a single government entity that guaranteed safe passage across most of Asia in order to facilitate trade. The Polos were robbed once they left the territory of the Mongol Empire.

          • Z: “That’s immaterial to your question. You asked what group of people benefited from open trade.

            Word games. There is no open trade in China, and what trade there is doesn’t benefit most of the people, who are paid less than their market value and must pay more than the market value for any imports. In addition the people don’t get the full value of their labor as their government chooses – for them – to invest some of their earnings in foreign assets.

            No, we said “Most people in China benefit from open trade”.

            Word games. There is no open trade, and most people don’t benefit from it in the amount of their production. You originally responded “China” to the question of who benefited from government trade agreements and policies. Now it’s “most people”, but we all know that’s absolutely not true. If you had an actual argument to present you would already have presented it.

            We said “Most people in China benefit from open trade”. You use words carelessly.

            LOL! “Nyaa, Nyaa, we know you are but what are we?”

            You’re just being silly now. Put on your big boy pants and present some economic arguments instead of playing word games.

            Openness is not a binary quality, otherwise you could not draw a distinction between the borders of the U.S. and the borders of N.K.

            Both are arbitrary, invisible, political lines in the sand. Obviously there are degrees of openness from completely open, to somewhat open, to barely open, closed. Open, at the one extreme, means unrestricted. That means no government restrictions on trade between parties in the two artificially defined groups.

            China is a trading bloc. People within China can trade relatively freely with others within that bloc.

            That’s right, but that’s not open trade.

            As borders are a necessity of security, rules for trade across borders are essential to expanding trade networks.

            Sheer nonsense. What is the goal of expanding trade networks? It is to increase the availability if trading partners and customers across borders. The ultimate end of such expansion can only be completely free and open trade, without government restrictions.

            People are more than capable of arousing themselves. People go to war. There’s pictures and everything.

            Yeah, some people do. How many of those pictures show people who were conscripted? (snatched up by force) Every major war, at least in the US has required a draft of those unwilling to travel away from home to act as targets and kill people they didn’t even know? Without forced service (slavery?) most major wars might have been minor skirmishes, or might not have happened at all.

            No. But there was a single government entity that guaranteed safe passage across most of Asia in order to facilitate trade. The Polos were robbed once they left the territory of the Mongol Empire.

            We knew that, but that’s not an example of trading blocs or trade agreements.

            Why is it just word games with you?

          • Ron H: There is no open trade in China …

            As we said, openness is a continuum, not a binary condition. China is far more open to trade, both internally and externally. That has had a positive impact on the lives of most of the people in China.

            Ron H: What is the goal of expanding trade networks?

            It increases the size of markets, meaning more customers, more sources, and that means greater wealth, and a more stable economic environment.

            Ron H: How many of those pictures show people who were conscripted? (snatched up by force) Every major war, at least in the US has required a draft of those unwilling to travel away from home to act as targets and kill people they didn’t even know?

            The U.S. has a voluntary army.

            Ron H: We knew that, but that’s not an example of trading blocs or trade agreements.

            The Mongol Empire was a single trading bloc, meaning trade could readily occur throughout the Empire. It also increased trade with neighboring countries because once entering the Empire, they could trade across the Empire.

            Ron H: Why is it just word games with you?

            A word game is when you refuse to recognize standard groupings of people. People can act in concert, such as countries, corporations, tribes, etc. When people act in concert, it is appropriate to give the group a name, and say, for instance, the 24th Regiment took San Juan Hill.

          • Z: “It increases the size of markets, meaning more customers, more sources, and that means greater wealth…

            Yes, with the ultimate end resulting in completely free trade with no government interference at all. the same could be achieved from the start by never imposing government limitations to begin with.

            …and a more stable economic environment.

            More stable than what?

            The U.S. has a voluntary army.

            Oops! Did we forget to specify “major war”?

            Nope, we wrote “major war”. The US NOW has a volunteer army, but no major war efforts since Vietnam.

            You are sooo slippery!

            The Mongol Empire was a single trading bloc, meaning trade could readily occur throughout the Empire. It also increased trade with neighboring countries because once entering the Empire, they could trade across the Empire.

            What about Italy? Was that part of the Mongol Empire?

            Ron H: Why is it just word games with you?

            A word game is when you refuse to recognize standard groupings of people. People can act in concert, such as countries, corporations, tribes, etc. When people act in concert, it is appropriate to give the group a name, and say, for instance, the 24th Regiment took San Juan Hill.

          • Z: “A word game is when you refuse to recognize standard groupings of people. People can act in concert, such as countries, corporations, tribes, etc. When people act in concert, it is appropriate to give the group a name, and say, for instance, the 24th Regiment took San Juan Hill.

            Even you must understand that not all groups are alike, and member status means different things in different groups.

            The 24th regiment is a unified group with a common single purpose. Every member of the group indeed acts in concert toward a common goal, as that is the purpose of the group. So, we can say that “the 24th Regiment took San Juan Hill”.

            Microsoft is a group of people with a single purpose, which is to earn profits for the owners. It is a voluntary group, in which owners and employees can choose to remain in the club or renounce their membership at any time for any reason. We can presume that members interests are, in fact, represented by the company execs or thy would sell their stock. Therefore we can say “Microsoft today announced an increased dividend for 3rd quarter”, without being contradicted.

            Other groups, especially groups of people only identified by geography, aren’t very likely a unified interest group at all, and shouldn’t be referred to by their group name unless you are referring to their geography or their political masters, who can’t possibly represent every member who just happens to reside within the artificial political boundaries and has no choice about the matter.

            Therefore you can’t say “China benefits from international trade agreements”, unless you want people to believe you are a sloppy thinker. You could say “the Chinese government”, or “some Chinese people”, but not “china” benefits. Got it?

          • Ron H: Yes, with the ultimate end resulting in completely free trade with no government interference at all.

            Sure, in the imaginary world. But in the real world, people organize themselves, including bandits and invading armies.

            Ron H: More stable than what?

            Larger trading blocs can ensure supplies even when one area may have shortages.

            Ron H: What about Italy? Was that part of the Mongol Empire?

            Zachriel: {The Mongol Empire} also increased trade with neighboring countries because once entering the Empire, they could trade across the Empire.

            Ron H: Even you must understand that not all groups are alike, and member status means different things in different groups.

            Sure, and that would be a legitimate argument, but you essentially handwave any such categorization. When someone says Japan attacked the U.S. in 1941, no one misunderstands what that means.

            Ron H: Every member of the group indeed acts in concert toward a common goal, as that is the purpose of the group.

            Not necessarily. Even in the military, people don’t always coordinate effectively or will shirk.

            Ron H: Microsoft is a group of people with a single purpose, which is to earn profits for the owners. It is a voluntary group, in which owners and employees can choose to remain in the club or renounce their membership at any time for any reason.

            There are people in Microsoft right now who couldn’t care less about earning profits for the owners.

            Ron H: Therefore you can’t say “China benefits from international trade agreements”

            Of course you can, and virtually everybody uses such language. Gee whiz, how many millions of examples do you need us to provide? How about a few hundred just from today’s news?

          • Z:

            It would appear at this point that you are just disagreeing to disagree without making an actual argument.

          • Ron H: It would appear at this point that you are just disagreeing to disagree without making an actual argument.

            Let’s look again.

            Zachriel: Each level of analysis has value (per capita GDP, national GDP). The U.S. is far more advanced than China, however, being able to act as a single economic and political bloc has important advantages in trade.

            You argued that we can’t treat nations as entities unless they are associations where membership is voluntary. That is simply false. Nations can act as discrete entities on the world stage. They can commit armies. They can regulate trade. They can reach agreements with other nations. Japan attacked the United States on December 7, 1941.

            Because China is a large trading community, it can negotiate favorable terms with other nations that want to open trade with China. It can bully smaller nations. It can dangle wealth before poorer nations in need of investment. While there are losers and winners, increasingly open trade has been a net benefit to China.

  6. Two points about this nonsense …

    1) PPP adjustment is well-known to be biased towards making the poor look richer and the rich look poorer. By their own admission, the PPP adjustment made this week biased that even further in the same direction.

    2) Do we really believe China’s official numbers? The international precedent is that no country understates its GDP numbers, and that countries with less political diversity do worse on this count.

    All of this is like telling a teenage boy that he’s stronger than his dad. He probably isn’t. He’s going to be though, but everyone will be happier if he waits his turn.

    Realistically, for China, this is still 20 years away.

    • much of the reported chinese “gdp” is deeply suspect.

      much of it is debt fuels construction of useless capacity and loss making GSE’s.

      one way in which this becomes evident is in consumer spending.

      consumer spending is 75% of us GDP. it is 36% in china.

      thus, while chinese per capita gdp may be 13% of the us, their consumer spending is not even half that.

      in per capita gdp terms, china is roughly equal to dominica and 30% poorer than mexico, but when you look at consumer spending, the gap widens still further.

      (mexico has 67% vs 36 for china and a much higher pcgdp)

      china has one of the lowest consumer spending %’s in the entire world. it’s a level generally reserved for massively resource dependent petro states where GDP is most run by a few companies/the state.

      using CIA 2013, mexico has 10,600 per capita gdp vs 6,800 in china.

      67% of 10.6 = 7.1k vs 36% of 6.8 = 2.45k in china.

      Mexico has nearly 3X the per capita consumer spending of china.

      it’s easy to forget just how poor china still is and how doubtful their GDP figures are.

      china is big, but it’s very poor and on a pretty unsustainable path.

      in the 80′s everyone thought japan was going to take over the world. now look.

      china is not going to be so different (though the demographics are better).

      their current path is unsustainable. there is going to be a serious chinese debt crisis at the province and local level in the next 5-10 years, and it is going to be UGLY.

      • I agree with that analysis, Morg. I spent some time in China a few years ago and it’s amazing how much of it is simply empty. When the Chinese bubble bursts, it will make 2008 look like a cakewalk.

        • Jon Murphy: When the Chinese bubble bursts, it will make 2008 look like a cakewalk.

          Which will have international repercussions—a measure of its size.

          • zach-

            china is big, but not rich. most of its debt is also owned internally.

            this will contain some of the mess, but to be sure, not all of it.

            they are more firewalled financially than most economies, but they also buy a lot of foreign assets and when they systematic over investment ends, it’s going to fuel global inflation in many goods (though likely the opposite in basic resources).

            china’s overcapacity has also allowed the west to pursue far looser monetary policy than otherwise would have been possible.

            if it starts to shutter aggressively, the west will need to tighten sharply or risk setting off serious inflation.

            a great deal of where and how the crisis hits will depend on how the chinese federal government responds to the provincial and local defaults. if they start selling global assets (treasuries, forex, gold) aggressively to fund bailouts, it could get very global and very messy in a hurry.

            jon-

            “Nothing happens in a vacuum.”

            then how does it suck up dirt?

          • then how does it suck up dirt?

            Are you telling me you believe in vacuums? You’re a vacuum believer?

            There are no vacuums anywhere. What are you doing, talking about them, talking silly lies, you silly person, there are no vacuums! What is this fiction? Oh, please, did you seriously believe for a second? Wait. Wait, you thought that vacuums were real? Oh that is rich!

            Hey everyone, get a load of the vacuum believer!

          • “Are you telling me you believe in vacuums? You’re a vacuum believer?”

            i believe in swordfish.

  7. Have I been banned? I’ve tried to post on several comment threads – including this one – and those posts never appear.

    Surely, you libertarians are not such wallflowers that you cannot handle a few critical comments.

  8. It used to be that Olympic medal charts would look to who won the most golds, then silvers etc. When other countries started winning more golds than us, we changed that to a total medal count.
    This article is like that: since we are going to loose the total GDP measure, let’s use another measure to say we are the best. Unfortunately on a per capita basis, while we are in the top 10, we aren’t winning that one either.

    The question I have is so what? The British don’t have much of an empire now, but their populace seem to have a high standard of living. Denmark’s empire didn’t stretch much beyond Scandinavia, Greenland and Iceland, and they too have a very high standard of living.

    I think we should look to a richer Chinese population as an opportunity to sell stuff to another billion people–the way we should have looked at South and Central America in the mid and late 20th century.

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