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Tuesday 22 Aug 2017 | 00:16 | SYDNEY
Tuesday 22 Aug 2017 | 00:16 | SYDNEY

The implications of Chinese economic primacy

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COMMENTS

9 January 2009 12:11

Sam accepts my arguments about US (long term) decline, but shies away from the conclusion. He is in good company. Kevin Rudd does the same, for example in his Townsville speech last year, where he predicted China would overtake America’s GDP in two decades, and then simply asserted that the US would nonetheless remain the unchallenged primary power in Asia until mid-century. 

Sam’s evasion is more elegant: he quite rightly asks what we mean by ‘decline’ anyway: America’s share of world economic power has been gently sliding since 1945, so what’s different now?

Well, I’d say something is different now. No country since 1945 has looked as likely as China does today to overtake the US in GDP to become the largest economy in the world.  That in itself is a big deal, if it happens. The place at the top of the global GDP league table doesn’t change very often. The last time was in the 1870s, when the US displaced the UK. The time before that was in the 1820s, when the UK displaced…guess who? China.

That gives us a hint about what is happening here, and why it may be so inexorable. It’s the simple power of numbers. Here is some amateur economic history: before the industrial revolution, individual productivity was pretty much the same around the world, and China was the biggest economy because it had the biggest population. The industrial revolution changed all that in some countries, starting in Britain. Now, after two centuries, China is at last catching up with the productivity spurt of the industrial revolution, and its sheer numbers come into play again – as long as China can hold the show together.   

On this account, America has been the largest economy in the world primarily because since 1870 it has been the largest country – by population, I mean — to have sustained the social, political and technological preconditions needed to maintain ‘industrial’ levels of productivity. Now China may be catching up.   

But Sam will ask again, 'so what? What would it mean for China to overtake, or even just approach, the US economically?' Well, the first thing to say is, we don’t know. The world we live in has been shaped for so long by US economic primacy that none of us can be sure how it would work without it. But I think we can venture a few judgements:

  • If China’s economic power does grow to approach or surpass America’s, it will almost certainly start to challenge American strategic and political leadership as well.
  • This challenge will come first and most importantly in Asia: it may be many decades, if ever, before China challenges the US as a global power, but the challenge in Asia is already evident and seems very likely to intensify over the next few decades.
  • The US will probably choose to compete for primacy in Asia against China’s challenge, rather than withdraw or enter some kind of power-sharing arrangement. That would make Asia a less peaceful and stable place, and confront countries like Australia with very tough choices.
  • Even if the US does decide to accommodate rather than contest China’s rise, the international order in Asia will have changed in profound ways. And this is the point about American ‘decline’. It is not that America faces – in any timeframe that matters to us – the kind of precipitous decline that Britain faced in the  20th century. It will remain, for all the reasons that Sam and Michael mention, an immensely strong power. But it may not retain the unique position of uncontested primacy that has been so central to global order – and especially to regional order in Asia – over the past few decades.  And that changes many things, especially for Australia.

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