It is now a foregone conclusion that China’s economy will become the biggest in the world sometime very soon. According to the World Bank, the size of China’s economy is $10.1 trillion, compared with $14.6 trillion for the U.S., based on purchasing power parity (which adjusts exchange rates to account for the different prices people pay for goods and services across countries). But China is narrowing the gap in a hurry. Over the past 10 years, the annual real growth of China’s gross domestic product averaged 10.5 percent, compared with 1.7 percent in the U.S. The Chinese economy increased at an annual rate of 9.6 percent in the first half of 2011, vs. a rate of less than 1 percent in the U.S. America’s days as top dog of global output are numbered, at best.
Should we care? People from Thomas Friedman to Niall Ferguson cite the looming change at the top of the world economic rankings as a bellwether of broader American decline. “We are the United States of Deferred Maintenance. China is the People’s Republic of Deferred Gratification. They save, invest, and build. We spend, borrow, and patch,” complained Friedman in a recent New York Times column. And yet having the world’s largest economy isn’t all it’s cracked up to be—and you need look no further than the history of China and the U.S. to see that. The swelling size of China’s economy may be a source of pride to the Chinese people, but America is still by far the better place to live—and will remain so for a long time.
Although economists are skeptical about China’s ability to sustain its current levels of growth, most agree it is only a matter of a few years before the Middle Kingdom’s 1.3 billion or so people produce more than the 310 million living in the U.S. That means history is repeating itself. The U.S.’s reign as the largest world economic power began a little before 1890, when it supplanted the previous global giant: China. According to data from the late Angus Maddison, an economic historian...
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