Will China Overtake the U.S.? Posner Comment

I have no crystal ball, and cannot predict China’s economic performance. I doubt that anyone can; there are too many uncertain variables. Typical projections, for example in a recent National Intelligence Estimate issued by the National Intelligence Council, a prestigious group within the U.S. intelligence community, are of the “more of the same” character: China is growing rapidly and can be expected to continue doing so. About all that one can do responsibly is list some of the factors that favor and some that disfavor China’s future growth. On the plus side, the Chinese population is highly energetic and intelligent, and of course vast; and there are still unexploited human resources, both in rural areas and in the workforces of the inefficient state-owned factories. If those factories are privatized (and probably therefore shut down), the workers will be freed to engage in more-productive economic activities. Although I agree with Becker that at some point China cannot continue progressing rapidly just by copying foreign technologies, already we see rapid growth of scientific research in China and a friendlier attitude on the part of the Chinese authorities toward intellectual property rights, which will facilitate the creation of new technologies. But there are definite negatives in the picture. I am struck by the resemblance between China and Wilhelmine Germany (1871–1918)—two aggressively, at times hysterically, nationalistic countries, paranoid about encirclement by potential enemies (in China’s case, Russia to the North, India to the Southwest, Vietnam to the South, and South Korea, Taiwan, and above all the United States, to the East), and possessed of economic institutions more advanced than their political institutions. That is an explosive combination. It may lead China to invest very heavily in military power and even to become involved in wars that could bring disaster upon it. The very pace of China’s economic modernization may be politically destabilizing. Fear of internal disorder, a fear rooted in bitter historical experience, is acute—how else to explain the government’s persecution of Falun Gong, an apolitical, quasi-religious Confucian sect devoted largely to physical exercise? Restive minorities include Tibetans and also a large number of Muslims in the western part of the country. As nations become wealthier, pressure for greater personal liberty grows; and while as Becker notes dictatorship is not incompatible with rapid economic growth, it increases variance in that growth because dictatorship is (despite appearances) a fragile form of government. A dictatorship can collapse suddenly and usher in economic disaster, as happened to Iran when the Shah was deposed in 1979 and, to a lesser degree, when the Soviet communist dictatorship collapsed. Apart from political instability, the continued rapid growth of the Chinese economy is threatened by infrastructure limitations, pollution, shortages and bottlenecks, a weak banking system, corruption—and the remarkable imbalance between male and female births. With 116 recorded male births for every 100 female births, and an excess of 70 million males over females in the population as a whole, Chinese men will soon find themselves competing for an inadequate supply of women. The result is likely to be a steep decline in the age of first marriage for women (as in polygamoous societies), which may in turn reduce female participation in the workforce and with it economic output. But how all these factors will interact in the decades ahead simply cannot be predicted.

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