Is China’s Economic Future a Rosy One? Becker
Starting with the opening of agriculture to private incentives in the late 1970s, China has experienced faster and more prolonged economic growth than any other country. In a mere three decades China has moved from a very poor nation to a middle-income level country, a development that pulled hundreds of millions of Chinese out of poverty.
China’s aggregate GDP is now second in the world only to that of the US. While its per capita income is still much smaller than that of America’s, many are predicting that even China’s per capita GDP will surpass that of the US in a few decades.
Perhaps, but let us not yet get carried away too quickly. Two other predictions in recent decades of countries beating the US are a reminder that projections of continued trends in income growth can be way off the mark. In 1956, Khrushchev proclaimed that the Soviet Union would bury the US, not militarily but economically. One might at the time have dismissed this as the exaggerations of a loud and belligerent leader, but similar predictions were common among mainstream economists. Various editions of Paul Samuelson’s best selling textbook Economics: An Introductory Analysis predicted that by a certain date the Soviet Union’s GDP would exceed that of the US, but each later addition delayed the date of overtaking. In the latest additions, that prediction was dropped from the book since by then it appeared ludicrous. As everyone knows, the Soviet’s centrally planned economy collapsed by the end of the 1980s, and Russian per capita and aggregate income remain far below America’s.
Japan’s economic growth was far more impressive than that of the Soviet Union since it continued at a rapid pace throughout most of the period from the 1950s to the end of the 1980s. In the 1980s, stocks on the Nikkei and housing prices in Japan reached enormous levels. Japan was substituted for Russia as the country that would before long overtake the US, and become the leading economic power (see, for example, Herman Kahn, “The Emerging Japanese Superstate: Challenge and Response). Yet Japan’s rapid growth stopped abruptly during the early 1990s, and that country Japan has largely stagnated economically for the past two decades.