May 01, 2011
China to become the world's largest economy in 2016?
Reader Mark sent me this article that says that an IMF report predicts that in 2016, China will overtake the US as the world's largest economy. There is some dispute about this because economic measures are hard to quantify, especially when purchasing power is factored in, as is done here. But the disagreements center on the date of overtaking. There seems to be a consensus that China will overtake the US at some point in the fairly near future.
As one analyst explains, "What we have done is traded jobs for profit. The jobs have moved to China. The capability erodes in the U.S. and grows in China. That's very destructive. That is a big reason why the U.S. is becoming more and more polarized between a small, very rich class and an eroding middle class. The people who get the profits are very different from the people who lost the wages."
The article speculates on the psychological effects on the US public of losing its place as the worlds biggest economy, a position it has held for over a century. My feeling is that the people in the US already have the sense that they are rapidly losing ground economically and so this will not come as a shock. What will come as a shock is when the US is no longer the world's greatest military power. That will take longer to arrive since military power lags behind economic power.