“Age of America Nears End” the tagend of the the article title reads.
Brett Arends of Marketwatch made a nice catch. He noticed yesterday that the IMF posted, with little fanfare, its latest assessment of China’s growth. In that assessment it forecast that according to Purchasing Power Parity measures China would pass the United States as the world’s largest economy by 2016.
“Most people aren’t prepared for this,” Arends noted. “They aren’t even aware it’s that close. Listen to experts of various stripes, and they will tell you this moment is decades away. The most bearish will put the figure in the mid-2020s."
But that's not the case. And the US falling behind China is not the real meat of this story, either.
The significance of the imminent dethronement of the US from the top spot is extremely significant, as Arends noted: “This is more than a statistical story. It is the end of the Age of America. As a bond strategist in Europe told me two weeks ago, “We are witnessing the end of America’s economic hegemony.” We have lived in a world dominated by the U.S. for so long that there is no longer anyone alive who remembers anything else.
Arends makes the point crystal clear:
The rise of China, and the relative decline of America, is the biggest story of our time. You can see its implications everywhere, from shuttered factories in the Midwest to soaring costs of oil and other commodities.
And in case you really miss the point, that means that whoever gets elected US President in 2012 will likely be the last US president since the end of the 1800s to preside a full term over the world’s largest economy.
The 2 page story and more of Arends’ interpretation is here:
The point I want to make is how China got here. In 1976 when Mao died China had the most numerous, the most miserable and the most deeply impoverished people on earth. At least 10 million people belonged to what were described as “one trouser families.” These people were so poor they were literally naked, owning only one pair of trousers among them which they shared to go work outside the house.
China had descended to this dire state due in very large part to a deeply ideological approach to politics and economics. Mao believed that as long as people thought the right thoughts, then the economy would follow (a sentiment not far different from Republican assertions along the same lines that if they can get the values right, the economy would come right). Mao’s Little Red Book and other forms of Mao Thought were prescribed as the be all and end all of political and economic thought and practice.
With just as much faith as the most fundamentalist of Dominionist Fundamentalists, China pursued the impossible dreams and dictates of Mao. Managers of factories were put in charge not because they produced the goods, but because they believed and said the right things.
In 1978 Deng Xiaoping began the process of reversing the madness and mayhem of Maoism. He insisted that ideology mattered nothing—results mattered—period. This was the point of his white cat, black cat saying—color of the cat didn’t matter as long as it caught the mice. It was clearly understood that this was a comment about ideology—call something capitalist or communist made no difference as long as it delivered the goods. His ruthless focus on results and his implementing of a snowballing process of increasing the size and influence of reformist groups has paid off in spades.
Bottom line: Chinese have little illusion and less patience with ideology. They test things, look very carefully at results, and implement the best practice they can find. Today Chinese managers are pitted against one another, with ceilings set for domestic prices of the goods and services they produce and rewards given for margins increases. There are no golden parachutes for managers in China. No Chief Executive Officer walks off with millions while the firm self-destructs (and if they try it and get caught, believe me they don’t just walk away—they end up with a bullet in the head.) Even governors of provinces and high officials have ended up in jail or stripped of assets and state jobs for financial shenanigans. They are treated like portfolio managers—if a province doesn’t produce according to their expert’s assessments, the politicians get replaced with more competent and productive officials. Sure, there’s plenty of corruption and mismanagement and misgovernment in China, but I read a lot more about corruption, incompetence and punishments for them in the mainstream Chinese press than in the US press. (Note: I have lived in Hong Kong and studied and taught about Chinese development since 1988.)
Chinese workers have learnt that if they cause problems (within bounds), managers will stump up pay and workplace improvements to buy them off. The result is that inflation in pay is roaring ahead. While America drifts further and further into the madness of ideological delusions, and while American workers are stripped of their union rights and enmeshed in longer workweeks and stagnant pay, Chinese are pushing ahead and wresting material improvements in their wellbeing from both capitalists and the state.
The “cat” in China may not be the white cat of democracy; it may indeed be the black cat of a peculiar form of state managed capitalism; but the results show that the Chinese cat is catching the mice.
The US government, our unions, and our businesses desperately need to focus on the realities of our changing circumstances. We are very soon to lose our preeminent place, our inordinate influence, and as our economy falls further and further behind, our ability to throw our weight around militarily. For many of us, that might be a welcome development. Surely spending as much as the rest of the world combined on our military is part of the reason we are in such decline. But the main foundation of our decline is in our own minds—Republicans have been deluded by religious and free market fundamentalists into believing that believing something makes it so. Democratic politicians believe in nothing or at least very little other than their own careers, and hence believe anything pushed on them with enough conviction, enough offers of self-enrichment, or enough threats of violence. And so Democrats in the US are just like the “whateverists” of Mao’s day—who went along with ideological madness for the sake of their careers and cushiony jobs and to protect themselves from the mobs.
I see much of what made China poor rising in America. I see the American pragmatism and belief in pushing government to make real improvements in the common lot that made the US great rising in China. We are clearly swapping places, not just losing position. If the people of the United States do not abandon their delusions and fratricidal politics, and do not reconsider their ideologically driven faith in free markets and belief in the various other delusions pushed by the American Chamber of Commerce, the Heritage Foundation and their ilk, we will surely fall much further than second to China.