Foreign Policy: $123,000,000,000,000*

[kristopher]

In this month's issue of Foreign Policy:

$123,000,000,000,000*

*China’s estimated economy by the year 2040. Be warned.
BY ROBERT FOGEL | JANUARY/FEBRUARY 2010

In 2040, the Chinese economy will reach $123 trillion, or nearly three times the economic output of the entire globe in 2000. China's per capita income will hit $85,000, more than double the forecast for the European Union, and also much higher than that of India and Japan. In other words, the average Chinese megacity dweller will be living twice as well as the average Frenchman when China goes from a poor country in 2000 to a superrich country in 2040. Although it will not have overtaken the United States in per capita wealth, according to my forecasts, China's share of global GDP -- 40 percent -- will dwarf that of the United States (14 percent) and the European Union (5 percent) 30 years from now. This is what economic hegemony will look like.

Most accounts of China's economic ascent offer little but vague or threatening generalities, and they usually grossly underestimate the extent of the rise -- and how fast it's coming. (For instance, a recent study by the Carnegie Endowment for International Peace predicts that by 2050, China's economy will be just 20 percent larger than that of the United States.) Such accounts fail to fully credit the forces at work behind China's recent success or understand how those trends will shape the future. Even China's own economic data in some ways actually underestimate economic outputs.

It's the same story with the relative decline of a Europe plagued by falling fertility as its era of global economic clout finally ends. Here, too, the trajectory will be more sudden and stark than most reporting suggests. Europe's low birthrate and its muted consumerism mean its contribution to global GDP will tumble to a quarter of its current share within 30 years. At that point, the economy of the 15 earliest EU countries combined will be an eighth the size of China's.

This is what the future will look like in a generation. It's coming sooner than we think....

http://www.foreignpolicy.com/articles/2010/01/04/123000000000000

[anonymous171]

1. Oh fuck the west is falling. And to add to that, Chinese is really hard to learn.

The 21st Century is going to suck.

[Zynx]

2. I hope they aren't just taking the present growth rate of China and extrapolating it through 2040.

That just flatly will not happen.

[kristopher]

4. Why not read the article and find out

Then you'll be in a position to make an informed comment...

[notesdev]

5. Yep

Math fail. The Chinese are running out of foreign industries to siphon off, and they just don't have a big enough domestic market to make up the extra consumption.

[kristopher]

15. I'd say you are wrong about Robert Fogel - Nobel Prize Winner

I'm sure there are criticisms to be made of Fogel, but you aren't making them.
http://en.wikipedia.org/wiki/Robert_Fogel

Robert Fogel
From Wikipedia, the free encyclopedia

Field Economic history
Cliometrics


William Fogel (born July 1, 1926) is an American economic historian and scientist, and winner (with Douglass North) of the 1993 Nobel Memorial Prize in Economic Sciences. He is best known as a leading advocate of cliometrics, a name for the use of quantitative methods in history.

Fogel was born in New York City, the son of Russian Jewish immigrants, where he graduated from the Stuyvesant High School in 1944.<1> He attended Cornell University where he majored in history, with an economics minor, and became president of the campus branch of American Youth for Democracy, a communist organization. After graduation in 1948, he became a professional organizer for the Communist Party. He later rejected communism and attended Columbia University where he obtained an MA in 1958. He received a PhD from Johns Hopkins University in 1964. Fogel has taught at Johns Hopkins (1958-1959), the University of Rochester (1960-1965 and 1968-1975), the University of Chicago (1964-1975 and 1981-), the University of Cambridge, where he was visiting Pitt Professor of American History and Institutions in 1975 and Harvard University (1975-1981). Fogel married Enid Cassandra Morgan in 1949 and has two children.

Fogel's first major study involving cliometrics was Railroads and American Economic Growth: Essays in Econometric History (1964). This tract sought to quantify the railroads' contribution to U.S. economic growth in the 19th century. Its argument and method were each rebuttals to a long line of non-numeric historical arguments that had ascribed much to railroads without rigorous reference to economic data. Examining transportation costs for primary and secondary goods, Fogel compared the 1890 economy to a hypothetical 1890 economy in which transportation infrastructure was limited to wagons, canals and rivers. The difference in cost, or "social savings" attributable to railroads was negligible - about 1%. This conclusion made a controversial name for cliometics.

Contents

Slavery and Time on the Cross

Fogel's most famous and controversial work is Time on the Cross, (1974) a two-volume quantitative study of American slavery co-written with Stanley Engerman. In the book, Fogel and Engerman argue that the system of slavery was profitable for slave owners because they organized plantation production "rationally" to maximize their profits. Due to economies of scale (the so called "gang system" of labor on cotton plantations), they argued, Southern slave farms were more productive, per unit of labor, than northern farms. The implications of this, Engerman and Fogel contended, is that slavery in the American South was not going away on its own (as it had in some historical instances such as ancient Rome) because, despite its exploitative nature, slavery was immensely profitable and productive for slave owners. This contradicted the argument of earlier Southern historians.

A portion of Time on the Cross focused on how slave owners treated their slaves. Engerman and Fogel argued that because slave owners approached slave production as a business enterprise, there were some limits on the amount of exploitation and oppression they inflicted on the slaves. According to Engerman and Fogel, slaves in the American South lived better than did many industrial workers in the North. Fogel based this analysis largely on plantation records and claimed that slaves worked less, were better fed and whipped only occasionally—although the authors were careful to state explicitly that slaves were still exploited in ways which were not captured by measures available from records. This portion of Time on the Cross created a fire-storm of controversy, although it was not directly related to the central argument of the book—that Southern slave plantations were profitable for the slave owners and would not have disappeared in the absence of the Civil War. Some criticisms mistakenly considered Fogel an apologist for slavery. In fact, Fogel objected to slavery on moral grounds; he thought that on purely economic grounds, slavery was not unprofitable or inefficient as previous historians such as Ulrich B. Phillips had argued.

Historian Herbert Gutman and others have rejected several of Fogel and Engerman conclusions task on variety of fronts. Gutman argued they relied on evidence from a single, unrepresentative plantation, and also noted the authors were extremely careless in their math, and often used the wrong measurement to estimate the harshness of slavery (for example, estimating the number of slaves whipped rather than how often each slave was whipped). Fogel and Engerman later acknowledged these criticisms in a later edition. In Slavery and the Numbers Game, Gutman argued that Fogel and Engerman also routinely ignored better, readily-available data. Gutman roundly criticized Fogel and Engerman on a host of other claims as well, including the lack of evidence for systematic and regular rewards and a failure to consider the effect public whipping would have on other slaves.


A survey of economic historians concludes that 48% "agreed" and another 24% "agreed with provisos" with Fogel and Engerman's argument that "slave agriculture was efficient compared with free agriculture." In addition, 23% "agreed" and 35% "agreed with provisos" with their argument that "the material (rather than psychological) conditions of the lives of slaves compared favorably with those of free industrial workers in the decades before the Civil War."
Recent Work

Fogel is currently the director of the Center for Population Economics (CPE)<2> and the principal investigator of the NIH-funded Early Indicators of Later Work Levels, Disease and Death project, which draws on observations from military pension records of over 35,000 Union Army veterans.

Much of Fogel's recent writing has incorporated the concept of technophysio evolution, a process that he describes as "the synergism between rapid technological change and the improvement in human physiology."<3> By using height as a proxy for health and general well-being, Fogel has observed dramatic improvements in health, body size, and mortality over the past 200 years. This phenomenon is examined more fully in the forthcoming "The Changing Body: Health, Nutrition, and Human Development in the Western World since 1700."

[FarCenter]

3. Chinese families save and invest a lot, and they discipline and educate their children

[anonymous171]

6. Or it's just that their government is hell bent on development at any cost. nt

[FarCenter]

9. Having lived through hell since 1950, people are bent on making their future brighter

[Juche]

12. What about the negatives of that

A high stress, materialistic, consumerist society with weak social ties (which is what China is becoming from what I can tell) has negative consequences. Mental health problems for one.

I remember reading a blurb about 2nd generation immigrants. Parents who move to the US wanted their kids to become doctors, scientists, lawyers, etc. So you have tons of Indians & Asians in these fields. But a therapist was saying tons of her clients were these kids. They found their lives isolated, stressed, miserable and unfulfilling.


China is experiencing massive social movement from the rural areas to cities (which is breaking up families). They are extremely competitive, stressed and seem to be becoming very materialistic. You have to wonder what the effects of that will be on people's mental health.

[FarCenter]

17. It is not much different than the US after WW II

There was massive flow of people from farms and rural areas to the suburbs. There was also massive migration from the Northeast and MidWest to the South and West, e.g. George H W Bush going from Connecticut to Texas to seek his fortune.

The extended family becomes truncated to a nuclear family. Relationships with co-workers and neighbors in the suburban community replaced those with relatives.

With better communications and transportation, the negative effects should be somewhat less within China. Even Chinese professionals in the US seem to keep in close touch with their families and return home fairly frequently. This contrasts with the experience of my grandfathers, who never saw their families in Europe after emigrating to the US.

[neverforget]

7. My first reaction is no way just because there aren't enough resources

in the world for such growth.

[Juche]

8. 45 trillion in 2040 according to other estimates

http://en.wikipedia.org/wiki/BRIC#.282003.29_Dreaming_with_BRICs:_The_Path_to_2050

Maybe they are referring to PPP.

[piedmont]

10. Consumerism and population growth may be poor predictors of success in this century.

The coming decades will be marked by resource scarcity. Economic models that assume unlimited growth potential will be obsolete.

[Juche]

11. He also makes no mention of China's demographic problems

In the article he talks about how demographic problems in Europe will slow economic growth. There will not be enough workers, but too many elderly. By 2040 Europe may be 1/3 elderly. He claims the graying of Europe will stifle innovation.

What he doesn't mention is that the problem is worse in China. Due to the one child policy demographics are skewed. Plus China isn't wealthy and doesn't have a pension or health care system for the elderly. Even the US, the least liberal developed country, still has a pension & health care system for the elderly.

One of the motivations for setting that up was realization that it would free children to pursue their own careers rather than be care givers and to support their parents. Think of all the people with good work ethics and advanced educations in math, science, economics, etc. who would have to stay home to take care of their parents if not for medicare and social security.

The worker to retiree ratio in China in 2040 will be 2:1. They will have 400 million elderly by then, making up about 25% of the nation.

So every demographic time bomb he predicts will bring down Europe is going to happen in China too. Plus China doesn't have the resources or infrastructure Europe does to deal with it. China doesn't have a developed health and pension system to care for the elderly like the US & EU do. Which means it will fall to their kids to not only take care of themselves and their children, but their parents too.

So what if Europeans have a little fun now and then? Well, fun has consequences. Declining fertility pushes up the age of the citizenry and shrinks the percentage of people in the workforce, and so impedes growth. Demographic changes also shape the hiring and promotion structures of individual companies, and not necessarily for the better; if the elderly cling to the best jobs well past retirement age, younger workers may have to wait an extra decade, perhaps longer, to get their turn. And because younger workers are a major source of new ideas, slowing down the ascendancy of the next generation may retard the pace of technological change. (If fertility rates remain as low as they have been, Italy's population will fall by half in 50 years. Naturally, politicians are doing everything they can. They are joining with the Holy See and telling young women: Please procreate.)

He makes no reference to how having 400 million elderly in China in 2040 will affect their society (25% of their population). But he claims the same problem in Europe will destroy their civilization's economy. He also makes no mention to how China's problems will be even worse since they are a developing nation. In the EU there are pension and health care systems, so people feel more comfortable retiring and allowing a new generation to take over. That isn't the case in China. People face more economic insecurity in retirement than in the EU and as a result have less incentive to retire.

Also, I didn't see the author talk about the role of natural resource shortages. We are hitting a point where many raw materials are seeing demand outstrip supply. I don't know what effect that will have on growth, but I don't know if he addressed it properly. He didn't bring it up.


I don't know tons about Fogel, but is he a neoliberal Friedman type? I saw he taught at Chicago. Plus his solution to the European crisis is basically to tell Europeans to become more workaholic and have more kids (which sound like right wing solutions). He also seems to have a problem with feminism, birth control and sex for recreation.






All in all, I'm not convinced. His economic GDP numbers seem way off. He seems like a right winger (he comes across as a neoliberal social conservative, which makes me question his validity since those kinds of ideas almost collapsed the global economy recently). He doesn't account for demographic problems in China, he just ignores them while claiming the same problems will destroy Europe, even though Europe is better equipped to handle them.

[invictus]

16. +1

[Make7]

13. That's a continuous annual average growth of about 8%.

No way is that happening. The country would be an ecological disaster if they were to continue their present course.
 

[Make7]

14. Actually it is a growth rate of about 10.59% per year!

Sorry for the error - I think I made a typo before when entering in the number of years.