I’m a big fan of Matt Yglesias, but I found this off hand remark to be both inaccurate and in poor taste:
Analysts now think China’s GDP may not overtake America’s after all, good news for the world, albeit slightly bad news for “One Billion Americans” book sales.
The only meaningful way of comparing countries is on a PPP basis. And on that basis, China’s total GDP is larger than that of the US. The media only uses current exchange rate GDP measures when they wish to belittle China. Nowhere in the media will you find stories reporting the “Japanese Great Depression of 2012-22”, even though in US dollar terms Japan’s GDP has plummeted in recent years. The media instinctively knows that a dollar measure of Japan’s GDP is meaningless.
If you don’t believe me, I’d suggest visiting Beijing and staying in a 4-star modern hotel, for $48/night. Or ride the Beijing subway, which is light years better than the NYC subway, and costs about 50 cents for a ride. Even real estate is cheap in China, if priced in rental equivalent terms (as we do when constructing our GDP data in the US.)
[Update: The hotel was actually $74/night.]
But let’s say I’m wrong and market exchange rates are the correct way to make comparisons. In that case, China’s GDP/person would be roughly 1/6th the level in the US. In other words, China would be a very poor country. Then Yglesias would essentially be saying, “Good news, the 1.4 billion Chinese people are likely to stay very poor.”
The US government is now actively trying to sabotage the Chinese economy. We gloat every time they fail, and wring our hands when they achieve a limited success, such as producing their own smart phone chips. And then our media wonders why the Chinese consumers are moving away from Apple iPhones for “nationalistic” reasons. I guess nationalism is a disease that only affects the Chinese, not us Americans:
But the biggest potential threat to Apple may be something more nebulous: a resurgence in Chinese nationalism that spurs everyday consumers to shun the iPhone and other foreign-branded devices.
Governments that do great harm to other countries can always find an ethical fig leaf to justify their actions. I suppose one could argue that a richer China is a threat to world peace. But where are the academic studies that suggest that economic growth increases warfare? Doesn’t the correlation usually go in the opposite direction? Don’t rich people have more to lose from nuclear war? Social science research has recently received a great deal of criticism, and rightly so. The replication crisis suggests that very little published research is of any value. But let’s say I’m wrong. Is there any reliable research supporting nationalism?
Tyler Cowen recently asked AI doomsters to show him the mathematical model that demonstrates the existential risk resulting from of future gains in AI. I’m asking someone to show me the model that demonstrates how nationalistic policies aimed at hurting the welfare of a nation of 1.4 billion people and causing bitter resentment in that country is likely to make the world a better place. Heck, I’d even be happy if someone could show me a model where gloating over economic distress that we caused in China will make the world a safer place.
If you could push a button and make China much poorer, causing unimaginable harm to 1.4 billion people, would you have enough confidence in the social science model in your head to push that button? Should we be rooting for mass poverty?
READER COMMENTS
David Henderson
Sep 8 2023 at 3:56pm
Excellent post.
In 2010, I gave a talk in Maryland to over 50 newly chosen Admirals. Topic: globalization. When I got to China, I said, “I don’t care if China gets 5 times richer as long as we get 2 times richer.”
OMG! From the reaction, you would think I advocated killing their favorite cat.
Richard W Fulmer
Sep 8 2023 at 4:09pm
In what ways? And to what extent are the US government’s actions – and the actions of other western governments – simply responses to an increasingly belligerent Chinese government that is cracking down on foreign business ventures in China in countless ways?
And does this US “sabotage” come even close to the level of Chinese self-sabotage? Xi Jinping has been working to tighten his control over the CCP and the CCP’s control over the economy for years with all of the inefficiency and waste that centralized control entails. More recently, his draconian COVID lockdowns significantly reduced his country’s production, forcing western companies to look elsewhere for suppliers. He has also funneled more of the nation’s resources into expanding the military, building island bases, purchasing key global seaports, and expanding China’s influence abroad.
Where are the academic studies that suggest that China has become less belligerent and less militaristic as its economy grew and its people became wealthier? Where are the studies suggesting that Xi values the material wellbeing of the Chinese people over his personal power and Chinese military might?
What are your suggested responses to a growing and growingly imperialistic China? There is solid evidence that China has weaponized the computer and communications equipment that its state-owned companies have sold to the West. Would you keep buying such equipment and incorporating it into our key infrastructure systems lest we impoverish and anger them?
Scott Sumner
Sep 8 2023 at 6:29pm
“In what ways?”
By refusing to sell high tech goods to China, and demanding that our allies also refuse to sell these goods. Also by putting high tariffs on Chinese goods.
“Where are the academic studies that suggest that China has become less belligerent and less militaristic as its economy grew and its people became wealthier?”
That’s my point. There is no evidence to support any of these policies–in any direction.
“What are your suggested responses to a growing and growingly imperialistic China?”
Mutual defense treaties among our allies is the best policy. (Nato, Japan, Australia, etc.)
“And does this US “sabotage” come even close to the level of Chinese self-sabotage?”
No. But that’s always true. We do 100 times as much harm to ourselves as the Chinese do to us. If we were serious about China being a threat, we’d allow tens of millions of Chinese engineers to migrate here and boost our high tech sector. Instead we keep them out.
Richard Fulmer
Sep 8 2023 at 7:22pm
And if those goods are being used by China and its military to prepare for an attack on Taiwan or to compromise the security of western countries, what then?
There is plenty of evidence of China’s growing belligerence. Spy balloons, Chinese “tourists” snapping photos of US military installations, incursions into Taiwanese airspace and into that of other countries, the construction of islands that are turned into military bases, harassment of U.S. naval vessels.
We have done so, and some of those engineers turned out to be spies.
I agree that trade barriers hurt everyone, but they are far less damaging than war. The question is how best to avoid war. Do we do it through appeasement (e.g., handing over Taiwan), or through strength? If we choose appeasement, will Xi be satisfied with Taiwan? If not, will we give in to his next demand and his next? How many allies will we hand over? Will we be able to defend ourselves after we’ve given them so much?
Scott Sumner
Sep 9 2023 at 12:45pm
I’m not advocating “handing over Taiwan”. I’m on record with the same view on both Taiwan and Ukraine. Provide military supplies but don’t involve US troops. But for some reason that gets me labeled an anti-Russian hawk.
Trump claims that Chinese students who come to the US are mostly spies. but that view has been thoroughly discredited. It’s the same paranoia that caused us to intern the Japanese-Americans in WWII. Immigrants to the US are overwhelmingly patriotic. The Chinese are good people; we should welcome them to our shores. They make us stronger and China weaker.
Lizard Man
Sep 9 2023 at 11:20pm
The reason to root against China right now is that a weaker China now is one less likely to attempt to invade Taiwan. And the aftermath of an attempt to invade Taiwan is likely to be far, far worse then any sanctions that the US is imposing now.
So far as I can tell, the US military has concluded that Taiwan would lose a war against China without the US military actively fighting against the PLA. So assuming that Sumner is right that the US shouldn’t actively fight the PLA due to risks of nuclear war, and the US military is right that without the US military actively fighting China the Chinese attempt at conquest of Taiwan is close to an inevitability, what happens the day after China launches the invasion? How much poorer will the people of China be then after the US decides that China is no longer allowed to be part of the international economy? Or, alternatively, if the US is unable to make crushing sanctions stick, how many other nations will conclude that they need to massively expand their militaries and perhaps launch preemptive strikes against their rivals because the US has been shown to be a paper tiger? How many more wars will be fought because the US can no longer credibly act as something of the world’s police force?
Richard W Fulmer
Sep 10 2023 at 11:15am
Unlike Trump, I did not say most. I said “some”:https://en.wikipedia.org/wiki/List_of_Chinese_spy_cases_in_the_United_States_of_America
Scott Sumner
Sep 10 2023 at 2:21pm
I think it’s truly bizarre to argue that US sanctions will make China less aggressive–just the opposite is likely to be true.
You want to impoverish 1.4 billion people based on a highly implausible social science theory that you have in your head, which has virtually no empirical support?
Mark Z
Sep 10 2023 at 8:01pm
I don’t think his argument is that it will make China less aggressive, but rather make it less capable of achieving its aggressive goals.
Toward that end, if one takes for granted (as many China hawks do) that a confrontation with China is inevitable, that it is going to invade Taiwan in any event, then it’s pointless to worry about what will make it more or less aggressive. It’s already decided it’s going ot be aggressive toward Taiwan (I don’t know if this is true, but it’s a premise China hawks tend to believe), and there’s nothing we can do about it, so the only objective is to make sure it’s as weak as possible when it finally does attack.
Rob Rawlings
Sep 8 2023 at 10:40pm
Just curious: Why the “as long as” ?
Richard W Fulmer
Sep 8 2023 at 4:51pm
Free trade has eliminated every economic excuse for war. Why build a factory to make bombs when you can build one to make things other people want and, instead of dying and killing for the goods and resources you need, trade for them?
Unfortunately, many other excuses still exist. In his book, On the Origins of War and the Preservation of Peace, Donald Kagan lists a few: differences in ethnicity and language, fear, envy, territorial disputes, thirst for power, desire to spread one’s religion or ideology, national pride, and a leader’s need to distract citizens from domestic problems. Such motives can’t be refuted with a cost-benefit analysis.
Gordon
Sep 8 2023 at 5:19pm
I’ve noticed that Matt Yglesias often uses subtle sarcasm to express disagreement with other views. I can see this statement of his as a mockery of those who engage in wild-eyed fear mongering of China rather than cheering on persistent poverty of a large portion of the world’s population. But it’s not possible to tell his intent with any great assurance. And that’s the problem of engaging in sarcasm via the written word.
Philo
Sep 9 2023 at 10:49am
Yes, sarcasm works only when the audience knows you well enough to appreciate that you could not possibly mean what you literally are saying. Thus, it is out of place online, with a large, random audience.
tpeach
Sep 8 2023 at 5:28pm
Most people in the West don’t like the idea of China replacing the US as the economic, military, political and cultural superpower.
Although if that’s the case, maybe we should focus on bettering ourselves instead of beggaring our neighbours.
Scott Sumner
Sep 8 2023 at 6:30pm
Exactly.
Jose Pablo
Sep 21 2023 at 12:08pm
The US replaced the UK as the economic, military, political and cultural superpower (the UK had previously replaced France on that role, France had replaced Spain … “replacements” seems to happen).
The US, while becoming the economic, military, political and cultural superpower, invaded Mexico (1846-48), seizing a significant portion of Mexico’s territory, and almost exterminated the natives previously living in the new lands claimed by the “raising superpower”. And you can only imagine what the US would have done to Cuba if Cuba had been a State of the US until 1949.
I don’t really see why China invading Taiwan should be morally “worse” than what the raising US did (or practically worse if the US does nothing following the forced reunification of China).
The track record of the previous economic, military, political and cultural superpower (the UK) is not better by any means (including, even, the ignominious termination of its mandate in Palestina in 1948).
Now, in any case, the US becoming a global superpower has been a blessing for humanity (arguably the greatest blessing humanity has ever known) and so it was the UK becoming a global superpower. And so it would be if China manages to pull out that trick in the future. It will mean that they have “discovered” a better way of organizing collective action.
The real problem of China becoming an economic, military, political and cultural superpower is not the invasion of Taiwan, it is that China’s dominance would mean that tyranny can produce better economic, military, political and cultural outcomes that democracy.
That would be extremely difficult to stomach for some of us.
Fortunately, this is never going to happen … I hope.
Robert Benkeser
Sep 8 2023 at 11:48pm
I generally agree with your points. However, isn’t Russia a clear counterexample? Europe thought that deeper economic ties with Russia would make Russia a better country. But it turned out that Russia had genocidal ambitions. Doesn’t China’s insistence that its borders extend beyond its current ones concern you? What makes China that different from Russia when they insisted that their friendship “knew no limits”?
Scott Sumner
Sep 9 2023 at 1:39am
Relative to Russia, China’s border issues seem pretty trivial. There’s a small disputed area in the mountains near India, where almost no one lives, and there are some uninhabited islands in the South China Sea. These islands are also claimed by Taiwan, but I don’t see anyone calling Taiwan a danger to the world. In contrast, Russia is seeking to conquer an independent nation of 40 million, and has its sight set on a number of other countries.
My biggest concern is that China might invade Taiwan (which would be a disaster), but that’s not a border issue. Even Taiwan’s constitution says there is only one China. Trading with China does not make an attack on Taiwan more likely.
I don’t think Europe’s economic relationship with Russia made the war in Ukraine more likely, indeed just the opposite. Russia had more to lose because of its economic links. Russia’s big mistake was miscalculating how successful its invasion would be.
We’ve tried to isolate North Korea, but I don’t see how that policy makes the world a safer place. Does it make North Korea less belligerent?
Robert Benkeser
Sep 10 2023 at 6:44pm
Thank you for the response! You’ve almost entirely convinced me.
It’s difficult to agree with you entirely because my wife is from Ukraine, and China’s relatively pro-Russia stance since the recent escalation in 2022 has made me suspicious of their motives.
Kevin
Sep 9 2023 at 6:42am
Hi Scott!
I would say I agree with you on the merits, but in the interest of understanding Matt’s comment, one of his core theses in One Billion Americans is that it’s genuinely better for the world if the current version of America holds more global influence than if the current version of China does, and (less importantly) as a result, this is in fact fairly well represented by a GDP to GDP comparison.
I am not so confident as Matt is in that thesis, but he has expressed it clearly and defended it in other places, most prominently One Billion Americans, in case you are interested in engaging with the argument I think he’s truly trying to make.
However, none of that is in the tweet and you make very salient points, so I’m not offering criticism, just some background you may not have had access to.
Scott Sumner
Sep 9 2023 at 12:48pm
“current version of America holds more global influence than if the current version of China does,”
Sure, I also believe our government is less bad. Other things equal it would be better. But surely not at the expense of pushing 1.4 billion people into permanent poverty!
David Seltzer
Sep 9 2023 at 6:20pm
Scott: “An empty stomach is not a good political adviser,” Albert Einstein. It seems we are engaged in a prisoners dilemma. Is it better for our government officials act in America’s hostile self-interest as a one off, or do we seek negotiation that makes both nations better off over time? The bottom right square of the Prisoner’s Dilemma matrix.
Jose Pablo
Sep 21 2023 at 12:23pm
“our government is less bad”
That’s interesting.
If China manages to produce a country that is more powerful that the US economically, militarily, politically and culturally (which I very much doubt), what “less bad” would mean in that case?, just “less aligned with Scott’s (and mine) core personal values”?
Thomas Hutcheson
Sep 9 2023 at 7:45am
I agree, taken literally. I think the crack about Yglesias’s book sales is the tip off that he means this seriously, not literally.
I am all for the US taking China (as ruled by the CCP) as a geopolitical rival, but that does not mean rooting against rising prosperity for Chinese people.
Scott Sumner
Sep 9 2023 at 12:50pm
I’m not at all sure the “good news” was sarcasm. Obviously with the book sales he’s half joking.
Andrew_FL
Sep 9 2023 at 2:16pm
If you could push a button and double Germany’s GDP per capital in 1938, would you? If you could push a button and cut it in half, would you?
Scott Sumner
Sep 10 2023 at 2:17pm
When a person gets this desperate, it’s a sign they’ve lost the argument.
Andrew_FL
Sep 11 2023 at 9:31am
Sincerely, this doesn’t seem like it should be a difficult question if you take your beliefs and arguments seriously. I presume you don’t want to answer because Social Desirability Bias makes you embarrassed by your answer. Logically, you think it would’ve been better if Germany were richer in 1938 rather than poorer-that *either* this would’ve made no difference to danger Germany posed to the world, or any such difference would not, obviously, outweigh the extent to which the lives of both innocent and guilty Germans would be improved.
Tom Chambers
Sep 13 2023 at 11:18am
I see your point, but one could also argue that if one pushed a button to double the GDP of Germany in 1932, Hitler might never have come to power.
I am not a fan of hypothetical alt-history because profound events typically have deep-planted roots and weeding them out becomes a never-ending chore.
Richard W Fulmer
Sep 12 2023 at 7:20pm
EconomicsEnjoyer
Sep 9 2023 at 7:25pm
I think it can be good that China will never suprass the US if this means that US growth is doing well, and the US model is proving better in reality than the Chinese model. If China falters due to outside circumstances, then that is a different story. It’s good news only in a strict sense it showcases the benefits of the US model.
However, I think the numbers are telling a far more important story than what is described by commentators. China has the highest test scores, a still relatively young age, and a high workforce to population ratio. If Chinese productivity was similar as American productivity(which due to their high test scores and younger age would indicate an easier time to obtain than for Americans), Chinese per capita income would far exceed America’s and the aggregate size would be 8-9 times greater than the US. So, China is merely at 1/9th of its potential right now, with the potential falling as China ages.
So in some warped sense, the current US approach causing China to double down on its growth model while preventing western style reforms might be helping in relative US geopolitical power.
Also, I think for PPP numbers, aren’t non-tradable things inputs into tradeable products? So why wouldn’t nominal numbers reflect that?
Scott Sumner
Sep 10 2023 at 2:16pm
The relative price of tradable goods varies dramatically from one country to another: The Balassa-Samuelson effect.
Jim Glass
Sep 11 2023 at 3:02am
The only meaningful way of comparing countries is on a PPP basis. And on that basis, China’s total GDP is larger than that of the US.
I don’t get the point of all this “mine is bigger than yours” stuff. Are we Elon taunting Zuck?
If the issue is which country is the richest and thus the most powerful and influential, it’s not close. Take China’s GDP number of choice, divide it by 4.24 for the population difference, compare to the USA number. China is poor. E.g. the World Bank has China GDP PPP per capita at 28% of of the USA. As China’s former Premier Li Keqiang said in 2020, as per Global Times: “600 million people have a monthly income of only 1,000 yuan ($140)”. That ain’t rich.
But wait, there’s a lot more to power and influence and “having the biggest” than being rich. There are alliances and institutional ties and relationships around the world that the USA has been building for 150 years. China …??? As a proxy for these I tried to count “military alliances”. The USA has literally too many to count, world-round, it depends on what you include. China I’d heard from several sources has only one, North Korea. I found that hard to confirm but RAND reports: “North Korea is the only country that has something akin to a security alliance with China.”
So, China has 28% of the GDP of the USA per capita, and North Korea as its military ally. Gee whiz, I’m scared! Yglesias is now making a story out of whether China will “overtake” the USA or not. What total nonsense. I guess it gets clicks.* As existential threats to the West go, the Soviet Union was a much, much, bigger deal.
That said, China is a significant threat. Everything in proportion and context. After all, Russia is a mouse compared to China and we (well, most of us) don’t like Putin gobbling up and destroying Ukraine, kidnapping Ukrainian children, eh? Maybe we should have been sterner with him to deter that, not turning the other cheek so happily when he started breaking agreements he’d signed left and right, gobbled up chunks of Georgia and his first chunks of Ukraine, publicly proclaimed his intent to roll back NATO to 1991 — should have convinced him that any such attempt wouldn’t succeed. Then we’d have the peace now so many proclaim they want, but were willing to do nothing to secure. Because, gee, cheap gas!! Mustn’t offend! The West that defeated the Soviet Union and Warsaw Pact couldn’t convince li’l Putin not to attack? Shame on us. Let’s try to do better next time.
Even real estate is cheap in China, if priced in rental equivalent terms
Really? That’s not what I’ve heard. The Financial Times reports that young newlyweds Lilian Li and her husband can’t afford to buy an apartment because “just the down payment” would cost “more than 30 years’ rent.” I doubt that’s a NIMBY issue.
Pierre Lemieux
Sep 13 2023 at 3:30pm
Scott: I agree with your main point, of course. In the zeitgeist of our times, people forget that “China” is made of Chinese, as they forget that “the United States” is made of Americans. One addendum to your post (that goes in the same direction as Jim Glass’s first point): in 2018, according to the Maddison Project data, the Chinese GDP per capita in PPP was 13,102 USD, which was 23.7% the American level. This compares to 18,556 USD in Argentina. In 1941, the US GDP was roughly where the Chinese equivalent is now. You will find a chart in my short Regulation article on “Why the Great Enrichment Started in the West.”
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