Gwynne Dyer: 21st century may not belong to China

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      The picture of the two Asian giants that most people carry around in their heads shows China racing ahead economically while India bumbles along, falling ever further behind. People even talk about the 21st century as “China’s Century”, just as they called the 20th century the American Century.

      But it may turn out to be only China’s Quarter-Century.

      The headline economic news this year is that India’s economy is growing faster than China’s. Not much faster yet, according to the official figures—a 7.5 percent annual rate for India versus 7.4 percent for China—but there is good reason to suspect that the real Chinese growth rate is considerably lower than that.

      Anybody who goes to both countries can see that India has a huge amount of catching up to do. The contrast in infrastructure is especially striking: China has 100,000 kilometres of expressways (freeways, motorways); India has only 1,000 kilometres.

      But the differences in income and productivity are also very big: Gross Domestic Product per capita in China is between three and five times higher than in India, depending on how you calculate it.

      But that is a snapshot of now. It was very different 35 years ago, when per capita income in India was still higher than it was in China. It was then-leader Deng Xiaoping’s decision in 1978 to open up the Chinese economy that unleashed the spectacular economic growth rates of the recent past, and an economy growing at 10 percent a year doubles in size every seven years.

      That means (allowing for a little slippage) that the Chinese economy has grown more than twentyfold since 1978. That’s why it is so far ahead now. India’s growth rate was a quite respectable three or four percent for most of that period, but that gave the Indian economy a doubling time of around 20 years, so it has only grown around threefold during the whole period.

      India is not chronically poorer than China. It just missed that particular bus.

      The next bus has now arrived: India actually could catch up with China if its economic growth rate is now really surging ahead of China’s. There is good reason to believe that it is, because China’s declared growth rate for this year is pure fiction.

      China avoided the global recession after the 2008 crash by opening the credit taps to full and embarking on the largest spending spree on infrastructure (roads, housing, railways, and airports) that the world has ever seen.

      But capitalist economies cannot avoid recessions forever. The country is now full of empty apartment buildings, the private debt load has doubled in five years—and the recession is coming.

      More than that, China’s period of high-speed growth was probably always going to be limited. Japan enjoyed a quarter-century of 10 percent annual growth in 1955-80 and became, for a while, the world’s second-biggest economy. But once its per capita income reached developed-world levels, the growth rate dropped down to developed-world levels too: between two and four percent. (Now it’s almost nothing.)

      In fact, all the East Asian economies (except North Korea, of course) have followed the same pattern: a lengthy burst of ultra-high-speed growth, followed by a fall to the developed-state norm once a certain level of prosperity has been achieved. South Korea and Taiwan both did it—and then subsided to a growth rate not very different from that of the United States.

      China has also had its quarter-century of 10 percent growth, and it is probably over. The official figure for economic growth last year was still over seven percent, but the less easily manipulated numbers for rail freight, electricity production, and bank lending suggest that the real growth rate was only around three percent. That is to say, less than half of India’s.

      The other thing that will hold China back in future is a steady fall in the population of working age. India’s birth rate is still 2.7 children per woman (though it’s falling fast). China’s is at most 1.7, and the one-child policy means that it may even be lower than that. So fewer and fewer young Chinese are entering the work-force, whereas there will be no shortage of young Indians.

      India’s total population will overtake China’s in less than five years (they are both around 1.3 billion), and after that the gap will steadily widen. While China’s population shrinks and its economic growth slows, India is only now entering the golden quarter-century of high-speed economic growth.

      In 25 years’ time, India may be back in the position it occupied for most of the past two thousand years: the biggest economy in Asia.

      Comments

      15 Comments

      Demographics

      May 7, 2015 at 1:00pm

      India is also much younger than China by population demographics.

      That usually translates into higher economic growth rates.

      Also most of the massive infrastructure development is ahead of India while China is overbuilt.

      India is more transparent capitalist vs China which is controlled by the Communist Party.

      More growth to be had in India than China in the long term.

      P.Peto

      May 7, 2015 at 1:15pm

      It's interesting to note that a country's "progress" is usually measured in economic terms such a GDP or GDP/capita rather in the many other civilizational or other cultural measures one can use to measure progress. It seems like progress is a kind of international rivalry where the goal is economic hegemony which may indeed be more preferable than military hegemony but invariably the two seem to go together. The game of predicting the world's economic "top dog" is a mug's idle venture as there are too many variables and uncertainties to be able to "predict" and outcome and which may in the end be of little human significance. Perhaps it says more about our crass commercial values and our propensity to gamble on a "winner".

      McRetso

      May 7, 2015 at 1:50pm

      Peto

      I'm pretty sure Gwynne Dyer was talking about economics, not some ill-defined concept of "progress". Economic growth, unlike "progress" is more-or-less objectively quantifiable.

      Economic growth and relative GDP (especially GDP per capita) are also very good predictors of other things. Countries with higer GDP and GDP per capita usually also have large workforces, competitive industry, high standards of living, and good education. They are also usually (though not always) more democratic and less religious.

      There are plenty of non-economic characteristics that might make a country attractive or not, of course. That said, when I hear people trying to say that economics are unimportant to the (never defined) "greatness" of a certain country, I usually just assume that they're trying to make excuses for said country.

      The other thing wrong with your comment is the idea that GDP is about being top dog, which isn't true. It's fun to speculate which country will have the bigges GDP (phallic metaphors abound), but the truth is that economic gains in one country can also be good for other countries. China, for example, is heavily reliant on exporting goods to the US, and therefore a healthy US economy is also good for China.

      exponential abyss?

      May 7, 2015 at 1:57pm

      I wonder where are all the resources for continuous growth are going to come from?

      How will India manage to feed and provide water for an expanding population? And for that matter, if climate change significantly decreases food production in the tropics, how will China?

      Will we see increasing competition in the battle for wealth and resources, along with degradation of the first world mean standard of living?

      Perhaps technology will save us, perhaps people will be incented to share...

      WilliamR

      May 7, 2015 at 5:20pm

      The idea of a pre-determined quarter century of growth for currently industrialising nations is an interesting one: Burma - from backwater to the powerhouse of southeast asia in 2040?

      The problem with predictions of course is the inherent assumption that current conditions will continue unchanged, and in India's case this seems most unlikely.

      Not only will the nation face severe problems feeding itself as climate change begins to bite, but the likelihood of a catastrophic war with Pakistan is increasing as Pakistan seeks to develop tactical nuclear weapons to offset India's superiority in conventional forces.

      Greg G.

      May 7, 2015 at 6:35pm

      I can see the point P.Peto is trying to make. To my personal life, I'm a lot more interested in where the country I'm living in ranks on the Human Development Index than on the per cap GDP growth, and despite what people focused exclusively on economic indications will have you believe, the two do rarely move in tandem.

      GDP growth benefits can fall exclusively to corporations or a well-entrenched socio-political elite, with the life of a country's average citizens often -worsening- with a jump in GDP e.g. African nations where valuable mineral and metal resources are discovered.

      As a case in point, it's always seems to make the news when the list is released every year that Canada has fallen from number one on the UN's Human Development Index to number eight, and in some other similar rankings by other NGOs often doesn't make the top ten anymore. This is despite Canada's GDP growing at a faster rate than it did when it was higher on the list. I've felt this impact personally since the day's under Chrétien when neo-liberal economic policies switched emphasis from full-employment as the main guiding principle to corporate freedom under the guise of de-regulation, privatization, and a smaller government footprint. This abandonment of Keynesian-guided economic policies that lessened the massive fluctuations inherent in the business cycle, leveling off both the peaks and the valleys, has meant over-heated bubble economies in the business cycle upswing and much more suffering in the valleys.

      Where I live in Saskatchewan, the boom of the last few years has made my life worse rather than better. While my annual wage increases have on paper -just- kept up with the rate of inflation as calculated by Stats Canada, all the goods that I spend the vast majority of my pay cheque on have gone up crazily, housing costs more than tripling, utilities costs as well, besides the increases in food, fuel, etc., that the whole country has experienced. While average wage growth looks great on paper, when you look at individual sectors, only those employed in construction and resource sectors, such as oil/gas and mining, have actually had wage growth in real terms. Some sectors, like education, real wage growth adjusted for inflation have gone down over 13%. So this great GDP growth in the province has really made life worse rather than better for the average citizen.

      shoegazer

      May 7, 2015 at 7:45pm

      "where have all the flowers gone"...the whole world's fucked.The little green granite planet never intended to have seven billion people.Nevermind how poor stewards we homo sapiens have been.And it's only going to get worse.

      Greg G.

      May 7, 2015 at 8:38pm

      You can never ignore the geopolitics when considering a country's expected economic growth. China for instance has a clear pattern that has been played and re-played over and over again over the centuries. It's economic development always has been driven by growth in the East along the coast, with most of the economic benefit going to those areas, too, while the great interior of the country contains an impoverished peasantry that feel more and more neglected as the growth continues and the economic divisions by those on the coast vs. the rest of the country deepen. Eventually, the great masses in the interior have had enough, and the country falls into chaos and economic decline due to these great disparities. This is talking about in great depth in George Friedman's book written in 2008 called "The Next 100 Years". For those who doubt the great power geopolitics can have in influencing the future of a country and it's relationships with other counties, here is another of Friedman's predications from 2008 which seems eerily prescient, summary from Wikipedia :

      "Second Cold War

      In the 2010s, the conflict between the US and Islamic fundamentalists will die down, and a second Cold War, less extensive and shorter than the first, will take place between the United States and Russia. It will be characterized by Russian attempts to expand its sphere of influence into Central and Eastern Europe, coupled with a buildup of Russian military capabilities. During this period, Russia's military will pose a regional challenge to the United States. The United States will become a close ally to some Central and Eastern European countries, all of whom will be dedicated to resisting Russian geopolitical threats during this period. Friedman speculates in the book that the United States will probably become a close ally of some Eastern European countries: Poland, the Czech Republic, Slovakia, Hungary, and Romania. Around 2015, a Polish-led military alliance of countries in Eastern Europe will begin to form, which is referred to in the book as the "Polish Bloc.""

      Ronnie

      May 7, 2015 at 8:43pm

      You can't eat money, you can't drink the liquid in your bank account. Those two countries are environmental disasters already. Just watch "Under the Dome," the Chinese documentary about air pollution there. Eye opener to say the least. In twenty five years China has reached a point where continuing growth in health outcomes with increased GDP has ceased, and is now becoming an inverse relationship.

      Hab In China

      May 7, 2015 at 10:22pm

      I almost always defend Dr. Dyer against his naysayers, but ai must disagree this time.

      While China certainly has issues, it is also build around a culture that values education and social harmony above all else. Those are both Confucian values, which coincidentally also includes a strong patriarch (read CCP).

      India, on the other hand, is still a diverse mixture of cultures without a unifying force or a strong government system /leader capable of making tough decisions.

      While India will surely grow, I don't see the same trajectory. While China has beautiful economic powerhouses in the Northeast, East, South and Central Inland; India seems more destined for Middle East style growth: Kuwait here, some Emirates there, a little Qatar or two, with chaos and poverty all around. I also can't call any economic growth progress until I hear a non-rape story making headlines .

      Source: An Indo-Canadian in China.