Italy, France, Great Britain, Germany and now Japan. In little more than a decade, China has passed every one of those countries to become the No. 2 economy in the world, officially overtaking Japan just this week.
Is that the specter of decline Americans hear galloping up behind us?
Many apparently think so, as evidenced by the widespread skepticism toward free trade. Americans have become so rattled by talk of decline, according to pollster Scott Rasmussen, that most don’t even realize the U.S. economy remains No. 1. He recently found “just 45 percent of voters know the United States has the world’s largest economy. Another 34 percent say it’s not true, and 21 percent are not sure.”
In fact, China and Japan together still don’t match U.S. economic might.
Let’s concede that Americans have reason for worry. Their federal government is spilling record amounts of red ink. The president’s budget reveals an utter lack of seriousness toward reining in runaway debt. Job growth remains anemic.
Yet let’s not lose perspective. China’s gain is not necessarily our loss. And despite the lingering effects of the recession, our standard of living is not in a tailspin. By a number of measures, it’s as high as or higher than it’s ever been.
Back in the early 1990s, when worries about Japan overtaking America were still riding high, I interviewed an economist and historian who explained how misguided it was even to use the term “decline” when speaking of economic competition among industrialized nations.
As Donald McCloskey explained, “The Dutch were one of the early industrializing countries, and they have been in relative economic eclipse, compared to other more powerful countries, for several hundred years. And yet, ask yourself, what is the condition of the Netherlands today? Why, it’s a fabulously rich little nation with among the highest incomes in the world, with domestic product per head quadrupling since 1900 alone.”
Britain was in relative decline for the entire 20th century, as the U.S. and Germany surged ahead, yet the average British citizen was still 3½ times wealthier at the end of that period than at the beginning.
“It is a clear advantage to have competent trade partners,” McClos key said. “Just as you are better off to have intelligent colleagues, or people in the same town who can provide you with goods and services, in the larger neighborhood of the world it’s advantageous on the whole to have very competent Japanese and very competent Germans.”
If there is cause for worry about the Chinese, it relates to the fact they are still governed by a party dictatorship with potentially hostile designs.
But the fear that Chinese economic success in itself threatens our standard of living, as if market competition were a case of winner-take-all, simply isn’t borne out by history.
But haven’t American living standards stagnated already in the face of competition? Actually, no. As USA Today reported last week, personal income has risen briskly since 1980, which helps explain, for example, why new homes have ballooned by 40 percent while the per-capita number of miles flown every year has doubled.
Much more than income is at play in lifestyle, too. “People grossly underestimate the progress over time because of technology,” Ohio State University economist Richard Steckel told USA Today. When Ronald Reagan was elected president, the article noted, cellphones didn’t exist and 2.5 GB of computer power cost $234,000. Today, Americans own nearly 300 million wireless phones and the same computing power costs $7. The influence of similar advances in medicine and a host of other technologies has been equally profound, if taken for granted.
So worry about China if you like. But the real threats to our future reside a great deal closer to home.
E-mail Vincent Carroll at vcarroll@denverpost.com.
