World Bank: China is now #1

Here’s what I said in 2012:

Each year I have done a post discussing the issue of when China will have the world’s largest economy.  Lester Thurow says it won’t be until the 22nd century; I say it may have already happened.

Just to be clear, there is no “fact of the matter,” just as there is no fact of the matter as to whether China or the US is larger in terms of square miles.  It’s what my students would call “merely a matter of opinion.”

And in 2009:

I think the best way to approach this issue is to use Rorty’s maxim “truth is what your colleagues let you get away with.”  Truth is socially constructed.  So imagine a timeline with a bell-shaped distribution above it.  The distribution shows the point in time when each economist thinks China has surpassed the US.  At the left end in 2010 is me, a China booster who (shamelessly) wants to get credit for being first to notice that America’s more than 100 year reign as number one is over.  The mode occurs when the World Bank says that China has achieved what Italians call “Il Sorpasso.”  And at the far right of the distribution, well into the 22nd century is Lester Thurow.  The mode occurs around 2016.  Mark your calendars.

The future is now.  The World Bank has (implicitly) crowned China for the (dubious) honor of having the world’s largest economy.  China declined the honor.

The US has been the global leader since overtaking the UK in 1872. Most economists previously thought China would pull ahead in 2019.

The figures, compiled by the International Comparison Program hosted by the World Bank, are the most authoritative estimates of what money can buy in different countries and are used by most public and private sector organisations, such as the International Monetary Fund. This is the first time they have been updated since 2005.

.  .  .

In 2005, the ICP thought China’s economy was less than half the size of the US, accounting for only 43 per cent of America’s total. Because of the new methodology – and the fact that China’s economy has grown much more quickly – the research placed China’s GDP at 87 per cent of the US in 2011.

.  .  .

With the IMF expecting China’s economy to have grown 24 per cent between 2011 and 2014 while the US is expected to expand only 7.6 per cent, China is likely to overtake the US this year.

The figures revolutionise the picture of the world’s economic landscape, boosting the importance of large middle-income countries. India becomes the third-largest economy having previously been in tenth place. The size of its economy almost doubled from 19 per cent of the US in 2005 to 37 per cent in 2011.

The India figures are also interesting, as in the second link above I suggest that India will have the world’s largest economy within 100 years (later I said 50 years.)

When I first read Lester Thurow saying China wouldn’t be number one until the 22nd century, I recalled his earlier praise of Japan (which I thought was wildly excessive.)  Now he was far too pessimistic about another rising Asian power.  I wonder what his views are on India?

Just to head off some tiresome comments:

1.  Yes, there is a big difference between total GDP and GDP per capita.  One matters more for things like impact on commodity markets and carbon emissions, the other matters more for the location of industries like Silicon Valley and Wall Street, or military prowess.  Germany has a bigger GDP that Switzerland, whereas Switzerland has the higher per capita GDP.  Both facts are very important, but in completely different ways.

2.  China is neither a big success story nor a big failure.  It’s a huge country gradually shifting from catastrophically bad public policy to mediocre policy.  It’s a work in progress.

3.  All generalizations about China are wrong.  Well, . . . all but one.

Lessons?  I need to be bolder in my predictions.  I thought the 2016 forecast was getting out way ahead of the curve.  But the World Bank surprised me.  Kudos to that organization for making a sensible PPP comparison.  

Don’t feel bad Americans!  You were the biggest for 142 straight years.  Now you can gradually settle into playing the sort of role Greece played to Rome, or Great Britain to the US.  Soon the rest of the world will be taking potshots at China, and ignoring the US.  Anonymity can be sweet.  When was the last time terrorists went after New Zealand?

After all, why do you think China declined the honor?