This article was originally posted on Socialist Economic Bulletin on Sunday May the 4th.
Facts can be a very severe judge. Either economic structures, the models used to explain them and economic policies work, or they don’t. The factual verdict alone can determine who was right, what was successful, what economic system works best.
The chart below is reproduced from The Economist. It shows the change in the IMF’s own estimates and forecasts of the level of US and Chinese GDP. Previously the IMF’s projections were that China would surpass the US as the world’s largest economy in 2019. Its revised estimates are that this will now occur at the end of this year. From 2015 onwards, when anyone refers to the world’s largest economy this will be China, not the US.
Chart 1. IMF Estimates & Projections of US & China GDP, PPP $ trillions
By any standards, this is a momentous economic event. The leading position in the world economy does not change with great frequency. The US surpassed China’s GDP at some time around 1890, having already overtaken Britain in in 1872. (The Financial Times is incorrect to place this earlier data as the key turning-point – it seems to have ignored China altogether).
In this sense the current reversal is a return to the norm. China’s economy, with a population of 1.3 billion people should be larger than the US. At the same, this higher population level means that per capita GDP is still much below countries like Britain or the US, although this gap too is narrowing rapidly.
As a result, it would be foolish to argue Britain should ‘copy’ China. Different geographies, different relationships with the world economy, different histories and different levels of current economic development would make that an impossibility.
But the Chinese economy has delivered exceptionally strong growth, and grown much more rapidly than the Western economies over a very prolonged period. In 30 years of the process of reform and opening up from 1978 to 2008 it has raised average living standards from the British level of the 15th century to the same as Britain in 1948. No doubt the advance since 2008 has been equally impressive (probably to something like the early 1960s in Britain).