Wednesday, July 18, 2012

Chinese Exceptionalism and American Defeatism

National GDP in developed countries is largely a function of population. GDP per capita is similar across developed countries, so the largest developed economies are those with the biggest populations.

If China develops, it will be the biggest economy in the world. If India develops too, China will fall to # 2.

China is developing, so it’s very likely that it will overtake the U.S. economy in size because it’s population is 4 times larger. This will happen in the next few decades.

But, we have a lot of nonsense floating around the legacy media that this is going to happen in the next few years, or may have happened already. Don’t believe it.

There are a number of problems with this sort of analysis.

Lastly, a lot of people worry about economic size because of military concerns: bigger economies win wars, and a bigger China might beat America in a war. Here, it’s instructive to study the economics of World War I. In that case, Germany (and its allies) came close to defeating the smaller economies of the U.K., France, Russia, Italy. But, part of the problem with Germany was that it wasn’t as developed top-to-bottom as the British economy was. And, the large subsistence portions of the German economy, which added up to quite a it in the GDP calculations, were not as readily mobilized for war.

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