Will China Surpass U.S. as #1 Economy Sooner Than We Think?
China surpassed Japan as the world's #2 economy last month. Next stop: #1.
Of course, the U.S. remains the #1 economy in the world - by a lot. But China is growing faster than the U.S. - a lot faster - so at some point, unless trends change, they've got a good shot at #1.
Is this really all that important?
Well, for one thing, there's the matter of "pride" or prestige. There are all those bragging rights when you're #1.
I once worked for a "#1" company in an industry, and all our marketing materials never tired of reminding the customers that we were #1. Then again, by the time I left the company, it had slipped. In their case, being #1 ultimately had the effect of making them fat and arrogant - and they've never regained the top spot.
Here's another #1 that's seen better days: AIG was - by far - once the world's #1 insurance company. I remember standing in the lobby of a building in downtown NYC waiting for someone I knew who, coincidentally, worked at AIG. There was a group of about five guys talking next to me. One of them, obviously some sort of sales guy from AIG, was pitching the others. He must have used the phrase, "We're the largest...," at least a half dozen times in the five minutes I stood there. When my friend arrived, I remember feeling relieved that I didn't have to hear this guy prattling on and on about how big AIG was. Less than a year later, AIG collapsed.
So what will happen with the U.S.? Will we lose our status as the #1 largest economy in the world? And does it really matter?
For one thing, current projections say China will be #1 in about 20 - 30 years from now. But predictions like that aren't always right. If you remember, I recently wrote about projections for Social Security that targeted 2017-2018 as the year that current FICA taxes would no longer be able to fund social security benefits, now that the Baby Boomers are starting to retire. It seems those projections will wind up being way off. We're just about at the crossover right now in 2010. (You can read about it here.)
So don't be surprised if China winds up #1 a lot sooner than predicted. Then again, it could take a lot longer - or maybe never happen at all.
But here's a second, more important thought. When I read that China had surpassed Japan as #1 economy, the first thing that popped into my head was the fact that there are a heck of a lot more Chinese out there then Japanese. China's population is around 1.3 billion. Japan's is around 127 million. So China's population is over 10 times Japan's population.
Of course, China has been a third world country for decades, while Japan has been an industrial power since before World War II. But now that China has joined the modern world and started acting more like a first world, rather than a third world, country, should we be at all surprised that their economy is bigger than a country that has less than 10% of their population?
What about the size of the U.S. relative to China? We're around 310 million strong. That's less than 25% the size of China's population. Plus, we've sent a lot of our industrial production to China (and many other places) in the last couple of decades. Should we be surprised if they pass us as #1 economy at some point in the not too distant future?
Now, admittedly falling from #1 doesn't feel great (if that happens). But Germany seems to be doing OK at #4. I didn't hear Germans moaning a lot when they slipped into 4th place behind China fairly recently. One of my children recently returned from a month in Munich and, from what he told us, it sounded like the Germans aren't starved for material goods.
So I wouldn't start wringing my hands or gnashing my teeth if I were you. Besides, you may already have enough on your plate to keep you occupied - what with unemployment way up, a lot of folks still worried they may lose their jobs, the fact that it's harder to earn enough to support a family - oh, and the millions of you who are looking at a greatly reduced retirement scenario, including the possibility that you may have to wait quite a bit longer before you can afford to stop working your 40+ hours per week at that job you love so much.
Besides, if and when China surpasses us as #1, for all we know India (with their billion+ population) may wind up passing them. Yes, I realize India's not the big growth story China has been. But then again, China's growth seems to be slowing down quite a bit now.
Bottom line: The world doesn't stand still. Stuff happens. But you knew that, right?
Of course, the U.S. remains the #1 economy in the world - by a lot. But China is growing faster than the U.S. - a lot faster - so at some point, unless trends change, they've got a good shot at #1.
Is this really all that important?
Well, for one thing, there's the matter of "pride" or prestige. There are all those bragging rights when you're #1.
I once worked for a "#1" company in an industry, and all our marketing materials never tired of reminding the customers that we were #1. Then again, by the time I left the company, it had slipped. In their case, being #1 ultimately had the effect of making them fat and arrogant - and they've never regained the top spot.
Here's another #1 that's seen better days: AIG was - by far - once the world's #1 insurance company. I remember standing in the lobby of a building in downtown NYC waiting for someone I knew who, coincidentally, worked at AIG. There was a group of about five guys talking next to me. One of them, obviously some sort of sales guy from AIG, was pitching the others. He must have used the phrase, "We're the largest...," at least a half dozen times in the five minutes I stood there. When my friend arrived, I remember feeling relieved that I didn't have to hear this guy prattling on and on about how big AIG was. Less than a year later, AIG collapsed.
So what will happen with the U.S.? Will we lose our status as the #1 largest economy in the world? And does it really matter?
For one thing, current projections say China will be #1 in about 20 - 30 years from now. But predictions like that aren't always right. If you remember, I recently wrote about projections for Social Security that targeted 2017-2018 as the year that current FICA taxes would no longer be able to fund social security benefits, now that the Baby Boomers are starting to retire. It seems those projections will wind up being way off. We're just about at the crossover right now in 2010. (You can read about it here.)
So don't be surprised if China winds up #1 a lot sooner than predicted. Then again, it could take a lot longer - or maybe never happen at all.
But here's a second, more important thought. When I read that China had surpassed Japan as #1 economy, the first thing that popped into my head was the fact that there are a heck of a lot more Chinese out there then Japanese. China's population is around 1.3 billion. Japan's is around 127 million. So China's population is over 10 times Japan's population.
Of course, China has been a third world country for decades, while Japan has been an industrial power since before World War II. But now that China has joined the modern world and started acting more like a first world, rather than a third world, country, should we be at all surprised that their economy is bigger than a country that has less than 10% of their population?
What about the size of the U.S. relative to China? We're around 310 million strong. That's less than 25% the size of China's population. Plus, we've sent a lot of our industrial production to China (and many other places) in the last couple of decades. Should we be surprised if they pass us as #1 economy at some point in the not too distant future?
Now, admittedly falling from #1 doesn't feel great (if that happens). But Germany seems to be doing OK at #4. I didn't hear Germans moaning a lot when they slipped into 4th place behind China fairly recently. One of my children recently returned from a month in Munich and, from what he told us, it sounded like the Germans aren't starved for material goods.
So I wouldn't start wringing my hands or gnashing my teeth if I were you. Besides, you may already have enough on your plate to keep you occupied - what with unemployment way up, a lot of folks still worried they may lose their jobs, the fact that it's harder to earn enough to support a family - oh, and the millions of you who are looking at a greatly reduced retirement scenario, including the possibility that you may have to wait quite a bit longer before you can afford to stop working your 40+ hours per week at that job you love so much.
Besides, if and when China surpasses us as #1, for all we know India (with their billion+ population) may wind up passing them. Yes, I realize India's not the big growth story China has been. But then again, China's growth seems to be slowing down quite a bit now.
Bottom line: The world doesn't stand still. Stuff happens. But you knew that, right?
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