Global power has many dimensions to it: economic, military, cultural, technological, intellectual and institutional. Today the US can still claim full-spectrum dominance. It is the world’s largest economy. It spends more on the military than the next 14 countries combined. Its popular culture – from films to music to fast food – has a global reach that is unrivalled. Its universities are the best in the world. US companies have led the information technology revolution. After victory in the cold war, there is still no coherent alternative to the political and economic ideas (capitalism and democracy) associated with the US. Most of the world’s most important institutions are either based in America (the United Nations, the International Monetary Fund, the World Bank), or dominated by Americans (Nato).This column of Rachman's elicited a lot of discussion. However, he deftly parries charges about China's perceived weaknesses in his latest blog entry by saying that these criticisms have been around for a long while, but have not really slowed down the Chinese juggernaut:Yet every one of these forms of dominance is under challenge. The most obvious challenge is economic. The rise of China is now so rapid that Goldman Sachs recently revised its projection for the moment at which the Chinese economy will be larger than that of the US. The bank now thinks that China will overtake the US by 2027 (in real dollar terms), rather than by 2035 as previously predicted. China already has the fourth largest economy in the world and by 2020 its economy will be bigger than that of every member of the G8, except the US...
When China is the world’s largest market and source of savings, international businessmen and bankers will have to pay attention to Chinese regulators – in the same way that they now worry about America’s Securities and Exchange Commission or Federal Reserve. The threat of exclusion from Chinese markets – already fairly dire – will make politicians around the world jump.
A huge economy will have more money to spend on the most basic form of “hard power”: the military. Chinese military spending is already large enough for some analysts to think that it could challenge US primacy in Asia, particularly if there were a clash over Taiwan...
The erosion of America’s power to lead is well under way. But it would be a mistake to assume that US leadership will simply end on the day – 20 years from now – when China’s economy overtakes that of the US.
Size is not everything. Even when the Chinese economy is larger than that of the US, the average American will still be far richer than the average Chinese. Combine riches with political freedom and it is likely that the “American dream” will remain much more attractive than Chinese reality for many years to come – sustaining the cultural and intellectual power that is a vital part of America’s ability to lead.
As the reality of an increasingly powerful China sinks in, bashing the US may also become a less popular pastime. Critics of the US who regard its foreign policy as amoral and nationalistic should meet the Chinese.
So what is my response to this?
First – most of these points are powerful ones. Clearly there are big questions about Chinese political stability, about the fragility of the banking system, about the environment and so on. When I was in Beijing earlier this year, the Chinese authorities seemed to be genuinely fearful of social unrest, if they were unable to keep the economy growing at double-digit rates. Even they seemed far from confident that future growth and stability is guaranteed for generations to come
So why am I still inclined to think that the Chinese economy will indeed be larger than that of the US within 20 years?
The first and possibly weakest reason is that I've heard predictions of an imminent Chinese crack-up for the last 15 years and – so far – nothing has happened. I worked as a foreign correspondent and editor in Asia from 1992-97, when memories of Tiananmen were still fresh. All the fears about China that are being expressed today - about democracy, the banking system, the state-owned enterprises, unrest in the countryside, protectionism in the west – were being expressed then, but with even more force. However China has kept growing. Of course, its possible that all these predictions of doom will be vindicated eventually. We will all be dead eventually, as well. But in the meantime, China's economic momentum is absolutely formidable.
The second and most important point is that this is a number's game. The reason that China will eventually be the world's largest economy is that its population is roughly four times that of the United States. Predictions that Japan would over-take the US, popular in the late 1980s, were always implausible. The difference in population size would have meant that the average Japanese would have had to become more than twice as rich as the average American for Japan to surpass America – and that was never going to happen.
By contrast, if you want to argue that China will never overtake the US, you would have to believe that China cannot achieve a GDP-per-capita of just 25% of American levels. And yet there are several examples of Asian “tiger economies” that have already got to that level and well past it – Japan, Taiwan, South Korea, Singapore (the latter, admittedly a micro-state) - some of them managing tricky transitions from authoritarianism to democracy, without stopping growth.
My colleague Martin Wolf points out that if China were to achieve the GDP-per-capita levels of Portugal – the poorest country in western Europe – its overall GDP will be larger than that of the US and the European Union combined.
So you don't have to dismiss all the arguments about Chinese politics, the environment, social unrest and so on – to believe that the Chinese economy will eventually over-take America. You merely have to note that industrialisation and rapid economic growth are very powerful processes once they get rolling. They can survive a great deal of social unrest – and even the occasional war – and keep powering on.
Good stuff from Gideon Rachman. Whatever country holds the mantle of world's largest economy twenty years hence, we should just hope that it doesn't abuse its position too much. We can all dream, no?
