Monday, August 16, 2010

The Big Question: Will China Overtake the U.S.?

With China having just surpassed Japan in terms of GDP, will China surpass the U.S.?

You have to think of the race between China and the U.S. in the way you would think of a football game between to teams who are making a lot of mistakes, neither side appears to really want to win.

As Jeffrey Miron points out:
China is hardly a bastion of capitalism. The government imposes a broad range of economic decisions on the private sector (e.g., green energy), and these “industrial policies” will prove costly down the line.

On the other hand, U.S. economic policy has shifted markedly away from economic growth and toward redistribution. So whatever mistakes Chinese policy will make, we are likely to make many of our own.
Further, China, though at a slowed pace, continues to print new yuan to prop up the dollar (For the benefit of China's exporters at the expense of China's domestic consumers), which is highly inflationary. At the same time the U.S. appears to want to internally destroy its economy by ever expanding government spending and government debt.

Neither side is acting as though it wants a sound economy. If this was a football game, I would have turned the television off by now.

2 comments:

  1. Given the title of the article, football is a great analogy. But I am more interested in their per capita performance and baseball would be the better analogy in that comparison.

    Rather than the governments lineman trying to force their economies to grow ten yards at a time, I'd like to see shrinking governments freeing individuals for great personal performances.

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  2. I think it'll definitely happen eventually, but I'm not sure when. Seems scary, but this article

    http://www.gobankingrates.com/investments/us-economy-still-no-1-but-for-how-long/

    says it might actually have a positive effect on the economy. Crazy right?!?

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