Is the 'Age of America' Really at an End?
You've no doubt read the ghoulish MarketWatch headline: "IMF Bombshell: Age of America near end." The story goes on to report that "China’s economy will surpass that of America in real terms in 2016 -- just five years from now."
Well -- yes and no and how much does it really mean?
China is indeed riding high. While the U.S. has yet to fully recover from a recession which "officially" ended almost two years ago and continues to struggle with 20% underemployment, China's economy grew by almost ten percent and created more than 15 million new jobs just last year.
Beijing has unashamedly made an economic colony out of much of Africa, while American power is being frittered away through piecemeal attacks in Libya and an overcommitment in Afghanistan.
The yuan is weak because China wants it to be, fueling an export-driving boom that has taken China from a backwater to a major power in 30 years. Meanwhile, the U.S. dollar plummets because nobody in D.C. can implement a policy to make it do anything else -- and the resulting inflation threatens us with a double-dip recession.
But there is more to the story.
Measured dollar-for-dollar, China's GDP is less than half that of the United States' -- it's only by measuring "Purchasing Power Parity" that the numbers are even close, even all the way out to 2016. Per capita, most Chinese are quite poor, making little more than $4,000 a year. Grade on the PPP curve, and your average Chinese still makes only around $7,500. Per capita GPD in the U.S. is a much-comfier $47,132.
America enjoys other strengths China lacks. "Soft power" might not win wars, but it does help develop and strengthen friendships. China can count its closest friends on the fingers of one hand, with three left over for making rude gestures: North Korea and Burma. If you judge a country by its friends… China comes up short. In trade, China's "brand" is probably best summed up as "dirt cheap crap." That's not how this country or Japan came up in the world.
On our side, the U.S. enjoys close (or improving) relations with India, Thailand, Vietnam, Indonesia, Australia, the Philippines, Taiwan, South Korea, and Japan. And those are just our friends in China's neighborhood. We used a policy of "containment" against the Soviet Union with mixed results day-to-day, but with phenomenal results when it mattered. The pieces for China's containment are already in place.
And while it's true that China has enjoyed the full fruits of capitalism, its economy still suffers from faux-communist distortions. From uninhabited, brand-spanking-new "ghost cities," to a financial sector that would make Tim Geithner blush, Beijing is sitting on multiple power kegs while smoking up a storm.
China is also up against the limits of its arable land. About the same geographic size as the U.S., China has four times the population and a lot more desert. Combined with Beijing's growth-at-any-cost policies, the Chinese ecology is under serious pressure.
However, China does have strengths all its own -- over three trillion of them, at last count. $3,050,000,000,000 is the current dollar value of China's foreign currency reserves, and that's the kind of big, swinging… purchasing power that can win a country some friends in a pinch. More importantly, cash reserves that size have let China paper over its most pressing financial difficulties. So far, at least.
The real secret to China's success is no secret at all. Whether it's accurate or not, reforming Chinese President Deng Xiaoping is believed to have told his people that "To get rich is glorious." Mao was dead, and so was communism. And the Chinese people heeded the call.
Our president has declared "that at a certain point, you've made enough money." Barack Obama certainly acts as though he thinks the U.S. is now plenty rich -- and should get no richer. Obama has used "spread the wealth around" as his policy on pretty much everything. Medicine? ObamaCare put everyone in the same leaky boat. Manufacturing? He gave away big chunks to General Motors to the UAW which had helped drag it down. Energy? There's been nice talk about nuclear energy, but also ham-fisted and unnecessary drilling moratoriums and threats to make burning coal economically unfeasible.
Our dollar is in a tailspin, our financial house makes Enron look like a model of probity, our education system costs too much while demanding almost no rigor of its pupils, and our East and West Coast cultural bulwarks remain staunchly anti-American.
And all those allies America can claim? Obama has made it a point to offend some of the best and strongest of them. The rest have certainly taken note.
China has aggressively pursued its national self-interest, while our president and his party have aggressively denied Americans the chance to pursue theirs.
The story isn't so much about China's rise. After all, an industrious, intelligent, and entrepreneurial people can be held down by their government for only so long.
After centuries of hardship, the Chinese learned that lesson to great success.
We need only to remember it.