In “Can anything hold back China’s economy?” Larry Summers makes a number of good points. By the way, his implicit answer to the question he raises in the title seems to be “No.”
Along the way, though, he writes as if the United States has one mind rather than over 300 million minds.
Good point #1:
At the heart of the problem in defining an economic strategy toward China is the following awkward fact: Suppose China had been fully compliant with every trade and investment rule and had been as open to the world as the most open countries at its income level. China might have grown faster because it reformed more rapidly, or it might have grown more slowly because of reduced subsidies or more foreign competition. But it is highly unlikely that its growth rate would have been altered by as much as 1 percent.
By the way, when he writes 1 percent, he clearly means 1 percentage point. It is very easy to imagine China’s growth rate being altered by 1 percent, which is trivial.
Good point #2:
Equally, while some U.S. companies might earn more profits operating in China, and some job displacement in American manufacturing because of Chinese state subsidies may have occurred, it cannot be argued seriously that unfair Chinese trade practices have affected U.S. growth by even 0.1 percent a year.
Here it’s also clear that by “0.1 percent” Larry means 0.1 percentage point.
The United States as one mind:
Can the United States imagine a viable global economic system in 2050 in which its economy is half the size of the world’s largest? Could a political leader acknowledge that reality in a way that permits negotiation over what such a world would look like? While it might be unacceptable to the United States to be so greatly surpassed in economic scale, does it have the means to stop it? Can China be held down without inviting conflict?
Let’s break down the above quote and consider each sentence or clause.
Can the United States imagine a viable global economic system in 2050 in which its economy is half the size of the world’s largest?
What is the United States? It’s a land mass with over 325 million people living on it. The odds are that most readers of this are among that 325 million. Can you imagine it? I can.
The rest of the paragraph raises good questions and I sense that Larry and I have the same answers.
Could a political leader acknowledge that reality in a way that permits negotiation over what such a world would look like?
He could. Would he, or she? I don’t know. Would it matter? If Larry’s right, it will happen anyway. And I bet he’s right.
While it might be unacceptable to the United States to be so greatly surpassed in economic scale,
There’s that “United States” thing again.
I bet it’s acceptable to lots of Americans. I gave a talk on globalization in Maryland to the 55 newly chosen U.S. Navy Admirals in 2010. It was kind of their one-week boot camp. I said to them that I don’t care if China’s wealth quadruples as long as our wealth doubles. Many of them resisted but, except for their concerns about increasing Chinese dominance in the world, had no other argument. And even on the dominance issue, the main Admiral who argued quickly admitted that his concern was Chinese dominance in China’s part of the world. I pointed out that we had this great barrier that would make it hard for the Chinese to invade us, namely the Pacific Ocean. None of them argued against that. Their argument came down to their desire for the United States government to dominate the world.
does it have the means to stop it?
Probably not. I think Larry and I agree on this.
Can China be held down without inviting conflict?
Probably not. Larry seems to think so too.
When I read people talking about what “United States” thinks, I remember an old Bastiat quote, but when I Google it, I find that I’m the only one who used it. So either it’s Bastiat’s, or it’s my mentor Clancy Smith’s, or it’s someone else’s, or it’s mine. Here’s the quote:
Bring society to lunch and we’ll talk about it.
In this context:
Bring the United States to lunch and we’ll talk about it.
HT2 Mark Thoma.
READER COMMENTS
Pierre Lemieux
Dec 12 2018 at 12:51am
That’s an important point you make, David: to always distinguish “the government of the United States,” “most people in the United States,” and “many Americans.”
Mark Z
Dec 12 2018 at 1:56am
As nations become more developed, they tend to become more specialized, less autarkic, and therefore more interdependent with other developed nations, so I think the natural trajectory, economically, is toward less hostility as a ‘rival’ nation develops. I’m fairly convinced that it’s the mistaken belief of much of the electorate (and therefore politicians) that a ‘rival’s’ economic development constitutes a threat that induces the confrontational foreign policy that often makes the other country more of a threat. It’s a self-fulfilling prophecy.
On the singular mind of the United States, the charitable interpretation may be that he’s just referring to the US government. In international relations people use this metonymy all the time, ‘the Russians want this,’ ‘the Germans don’t like that,’ when they mean the Russian or German government. It can sometimes be grating, but I can’t say I haven’t sometimes done everything in my power to cut out a few syllables from a sentence, so I’m not totally unsympathetic.
john hare
Dec 12 2018 at 4:36am
I can picture an economy in 2050 with the US being in the same relative economic position as today. It doesn’t involve holding others down though. It would be if the US could move ahead at similar or even faster rates than any competitor. If possible, the method I would see involves getting a much higher percentage of our population engaged in exploiting their individual potentials. Certain aspects of Silicon valley writ large.
This is from my perspective of seeing enormous waste at the individual level. Not working more hours, but working smarter hours at things the individual is passionate about. Learning to avoid waste of lifeyears trapped in dead end jobs to pay for things not appreciated. I have seen a half dozen individuals in the last five years break out of the rut. Nation wide the attitudes involved would be an economic and freedom breakthrough. Government is part of the barrier, but only part.
CZ
Dec 12 2018 at 7:29am
Excellent point. I would add that concerns about Chinese dominance ignore history. China had the world’s largest GDP until 1870; was it dominant then, even in its own region? Obviously not. China’s GDP during the First Opium War was several times larger than the UK’s GDP, yet the UK quickly and decisively defeated China and imposed the unequal treaties on China.
As the UK did in the 1800s, the US today has higher per capita GDP (which allows a larger surplus to fund military spending), more advanced technology, less corrupt institutions, greater alliances, and control of critical world infrastructure in finance, shipping, etc. China will not come close to challenging any of this even if its GDP is double ours.
Jon Murphy
Dec 12 2018 at 8:51am
I think this is an important point and why I staunchly oppose any trade war with China (or, for that matter, Korea, Japan, or withdrawing from the TPP). I listened to an interesting podcast (I think it was Liberty Law Talk, but I don’t remember which one) in which the speaker made the point that Trump’s withdrawal from TPP and his subsequent trade-fear mongering signaled to many countries in the Far East that the US was no longer interested in that region, that they would be unable to count on US investment and support. Thus, they are more likely to turn to China for investment and support being the next best option.
Donald Trump’s behavior, rather than limiting the growth of China’s influence, may indeed increase the growth of China’s influence.
S D
Dec 12 2018 at 9:24am
David
You are a good writer, and often have something interesting to say.
But you, me and Larry Summers all know they difference between a per cent and a percentage point. The error was likely carried out (consciously or unconciously) by an editor at the FT.
Spending dozens of words quibbling about this non-point just makes me less likely to read your next blog post.
David Henderson
Dec 12 2018 at 10:37am
To SD:
Thanks.
Correct. I didn’t know about you because, of course, I don’t know you and wasn’t addressing you specifically. And note that I explicitly said that Larry knows the difference. I’m addressing people who might not pick up on that. I’m following the three rules for good writing that an editor at Fortune gave me in the late 1980s: clarity, clarity, and clarity.
I’m sorry you feel that way. But obviously, you have a right to make that decision.
Brian Donohue
Dec 12 2018 at 10:38am
Good post. Not your point, but Stephen Kotkin has observed of China that, unlike the US, China has “no West coast, no California” and shares borders with a jillion other countries.
Garrett M
Dec 12 2018 at 11:34am
This seems similar to Scott Sumner’s repeated point on public opinion:
“As far as “public opinion”, I don’t believe it exists. In a democracy, voters elect leaders that (we hope) will enact policies that make the country a better place.”
Todd Kreider
Dec 16 2018 at 12:14pm
I think it was good for David Henderson to clarify the percentage point because often it is not clear.
CZ: “China will not come close to challenging any of this even if its GDP is double ours.”
Of course it will. By 2030, China’s GDP per capita will likely be about half that of the U.S., up from one quarter today. By 2050, China’s GDP will be equal to the GDP per capita of the EU and not too far lower than the U.S. Of course, China will also be a democracy well before 2050…
Dave L
Dec 16 2018 at 1:59pm
Given that China’s population is 4 times that of the US, if China’s GDP was twice ours, their per capita GDP would still be only half that of the US. This doesn’t mean we need not worry about Chinese behavior, of course, but neither do we need to overstate their economic power.
Charles
Dec 17 2018 at 9:50am
Pascal Boyers excellent “minds make societies” goes in this issue in a fascinating way. Describing how our cognitive toolset evolved to understand and relate wth individuals and small groups. Large organizations and states beyond that scale are an evolutionary recent phenomenon, so we have to use existing cognitive tools to understand them.
That’s why we assign agency to companies or countries etc, as if they were an actual person with intentions and desires, rather than an amalgamation of the individuals within (as you point out) who are too large in number to intuitive understand.
Really worth a read, my favorite book this year!
https://yalebooks.yale.edu/book/9780300223453/minds-make-societies
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