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Robert Fogel is optimistic about China
In 2040, the Chinese economy will reach $123 trillion, or nearly three times the output of the entire globe in the year 2000, despite the influence of several potential political and economic constraints. India's economy will also continue to grow, although significant constraints (both political and economic) will keep it from reaching China's levels. The projected decline of the EU15's global share of GDP means that Asia will be poised to take up the role of promoting liberal democracy across the globe.
We also are told that the Chinese market in 2040 will probably be larger than the combined markets of the U.S., EU15, India, and Japan. Chinese per capita income will be $85,000, more than twice the forecast for the EU15.
Here is the paper. Fogel does argue for his conclusions. His main point is that simple extrapolation of human capital trends, namely China's potential for more higher education, and further shifts out of agricultural labor, will get the country most of the way there. He also argues that after 25 years of 8-10 percent growth, massive bankruptcies are unlikely. Chinese leaders have, in Fogel's view, a good strategy for the devolution of power and the co-optation of elites.
If you wish to be brought back to earth, here are my views on the future of China. I believe it is the only time I have ever used the phrase "business cycle burp" in my writings. But sadly, Yana and I have yet to make it to Shanghai. Now that she has graduated from high school, I am hopeful we will get there...
Posted by Tyler Cowen on June 19, 2007 at 07:06 AM in Current Affairs | Permalink
Comments
I always confuse intensive with extensive development. China has heretofore almost exclusively done the one that involves importing technology made elsewhere, rather than inventing new stuff. There's a plateau of wealth that can't be crossed unless you're inventing new stuff--on the other hand, if you're inventing new stuff enough you tend to cross that plateau rapidly.
I question whether the Chinese model can make that transition easily and without social turmoil. If it can, the sky's the limit--if not, there will be indeed a substantial burp.
Posted by: jb at Jun 19, 2007 9:05:54 AM
Those on the wildly bullish camp - Chinese Economy To The Moon! - hardly ever seem to consider how rapidly China ages over the upcoming decades. It seems the country is in a race to become advanced enough, productive enough, and wealthy enough to afford the inevitable and otherwise crushing health and social costs. Demographics will be a large challenge ... that is until it adopts and enforces a "one granparent" policy.
Posted by: glenn at Jun 19, 2007 9:18:09 AM
Wow.
I hope the CCP paid him for that opinion. It's a shame to throw away credibility like that without at least a few crumbs' compensation.
Posted by: Alex Forshaw at Jun 19, 2007 9:24:40 AM
Tyler, I think your views on the future of China are right on.
The current China boom is nothing but vendor financing fraud on a Brobdingnagian scale. Just as the managements of Nortel and Lucent made them appear to be great successes during the telecom bubble by lending the money to buy their output to customers lacking any real ability ever to repay, so does the Chinese elite make China appear a great success by lending us the money to buy their exports, though we can never repay by exporting to them goods and services of equivalent value. As China is a totalitarian country, this fraud will continue until the stresses it will inevitably generate cause the system to break in some very spectacular way.
Posted by: jm at Jun 19, 2007 9:40:02 AM
If it were just for his probably unfounded optimism! I once went to a lecture of his on China, and I was appalled: He is an unashamed apologist for the communist regime. He would insist that all those piddling apparatchiks were working hard for the welfare of the masses and were eager to get input from anyone who had something to say - just go to the Tiananmen Square, start shouting that the Chinese system of taxation is a mess and they will get you an appointment at the ministry of finance before you can say Jack Robinson. Not a single word about oppression, numerous strikes, unbridled corruption. The audience had to bring up those problems but he didn't bat an eyelid and whitewashed them. The Chinese listeners in the room were as flabbergasted as me by the message of his speech. I lost all of my respect for him. Several decades ago, pundits of his ilk who extolled the Soviet Union were dubbed "useful idiots". He deserves that label no less.
Posted by: IM at Jun 19, 2007 10:01:00 AM
Tyler,
In your previous post you wrote:
""China in the 20th century had two major revolutions, a civil war, a World War, The Great Leap Forward [sic], mass starvation, the Cultural Revolution, arguably the most tyrannical dictator ever and he didn't even brush his teeth, and now they will go from rags to riches without even a business cycle burp." I don't think you can do it with a straight face."
This statement is safe, because no economy that we know of has grown at a constant rate year after year with no variance. So what?
Your focus upon the negatives of the 20th century ignores key differences in what is unfolding now. To me, a key difference will be the unintended consequence of China's one kid policy. The sex ratios in many regional young/unmarried age cohorts is somewhere around 120 to 90-something. What do you think is going to happen here? Do you think that young unmarried males in China are going to become monks? I don't. I think they will find wives elsewhere. My prediction is that this will end up preventing China from going into isolation as it has done several times in its history (with disasterous impacts upon its rate of economic growth). That is, China's ties to the rest of the world are on track (due to the one kid policy) to expand; China is on track to become more cosmopolital. I predict more and more openness in China as a result of infusions of new ideas. For this reason I heavily discount all dismal all forecasts that speculated that there China will slam the door to the outside world again (as it clearly has several times in its history).
Posted by: indiana jim at Jun 19, 2007 10:08:04 AM
I'm going anonymous on this one because I happen to be a fairly close relative of Bob Fogel - but I agree with Tyler. China simply doesn't have the liberal intellectual climate in place that would encourage innovation and unfettered growth - which is not to say that it never will, or even that it won't develop such a climate within this century, but it isn't there now and will take a lot more time than Bob estimates.
Posted by: anon at Jun 19, 2007 10:22:24 AM
Why does this straight-line Chinese economic extrapolation remind me of global warming doomsaying? I mean, it's not like anyone would say because the temp's maybe gone up .6 degrees in the last century it will go up twenty degrees by next Friday! Oh, wait ...
Posted by: Robert Speirs at Jun 19, 2007 10:34:52 AM
Without reading the paper, 85000 p.c. by 2040 implies an 11% per capita GDP growth rate over this period, which implies an even faster overall GDP growth rate. Bob is a first-rate economic historian, but surely this is impossible. As Chinese GDP per capita approaches American levels, the only substantial method left of increasing growth is new innovation. Importing knowledge can only take a country so far. If China can maintain a growth rate that incredible over the next 33 years, I'll gladly give the communist regime a free pass. Growing only 7% per capita (which, again, strikes me as too high in the long run) would give China a level of development similar to South Korea by 2040, which would be a major, major accomplishment.
Posted by: cure at Jun 19, 2007 10:41:17 AM
cure,
I think your posted prediction is more reasonable than Fogel's, but again, this goes against Tyler's dismal references to the door slamming propensities etc. in the 20th century.
And to anon,
I predict that a liberalizing of the intellectual climate is to be reasonably expected in China's future.
Posted by: indiana jim at Jun 19, 2007 11:20:05 AM
China's 20th-century history is that of a power vacuum, and the violent successive attempts to fill it. The Communists did what their predecessors did not, namely, successfully pass the regime off the next generation.
Looking at the past history of revolutions, there seems to be a crisis after 25-ish years associated with the succession. A system that survives that faces its next crisis after another 50-ish years, about the time that the revolution is passing from living memory. I think the events of 1978 and the successes of the reformed Communist system have bought the current government legitimacy until around 2025-2030. After that is anyone's guess.
Posted by: Cyrus at Jun 19, 2007 11:44:28 AM
Wow. 85,000 per capita income by 2040. That's pretty damn fast, given that I'm finding a number more like $5500 for 2004 (PPP). That seems incredibly optimistic to me. This would be caused by a serious catch-up effect, I guess.
Posted by: jason voorhees at Jun 19, 2007 11:44:57 AM
Wouldn't the Japanese model seem the most likely for China in the long run -- catch up with the Western Europeans in per capita income, then hit a ceiling?
Posted by: Steve Sailer at Jun 19, 2007 3:45:14 PM
I question whether a lopsided male to female ration in China will lead to it becoming more cosmopolitan. Even if Chinese males look overseas for wives, how many countries will encourage a foreign nation from taking its women? We are not talking about a slight imbalance here, but millions. If they take foreign wives, it substantially hurts the ability of local men in those countries from finding wives of their own. That will create new troubles. I also question the logistics of all those men being able to find foreign brides. A minority may, I think most will still lack.
A nation with young men who are not constrained by marriage will have more of the problems associated with young men such as violence and crime. China will seek an outlet for such aggression. There is a distinct possibility for war in this scenario. It directs the violence outwards, and helps unite the country. Whether China wins or loses, it will have less young single men who could cause trouble at home. If they win, they'll prestige from victory and perhaps more land (if they invade Taiwan). Taiwan is the least worst scenario. What if China invades Mongolia, Central Asia, or even Russian Siberia?
Having lots of young men with no prospect for marriage is never good.
Posted by: Chris Durnell at Jun 19, 2007 8:12:21 PM
Chris wrote: "Having lots of young men with no prospect for marriage is never good."
I agree, but this is hyperbole; that there are "no prospects" is gross exageration. The world is full of prospects.
Posted by: indiana jim at Jun 19, 2007 9:25:49 PM
"Taiwan is the least worst scenario. What if China invades Mongolia, Central Asia, or even Russian Siberia?"
I don't see how Taiwan is better than Mongolia or Central Asia. That would just be a non-event, like the takeover of Tibet. Russia on the other hand could lead to serious nuclear war...
In an extreme case, they could invade North Korea, maybe with US air support :)
The best hope for the sex imbalance is mass importation of women from somewhere like... Africa. Sure the African men are going to be pissed off, but what are they going to do? To fight back they'd need to develop an economy first, and if they did that their women would stop leaving.
Posted by: doctorpat at Jun 19, 2007 10:47:20 PM
Somehow, I cannot get my mind off that essay on Dow 30,000.
Posted by: Hafiz at Jun 19, 2007 11:49:42 PM
What's even more amazing to me than Fogel's straight-line predictions of China's growth is his assumption that "Asia will be poised to take up the role of promoting liberal democracy across the globe."
Where the heck did he pull THAT one out of?
Posted by: Mr. Noah at Jun 20, 2007 10:44:47 AM
