Comment Re:I wish I fully understood (Score 1) 477
If I could predict the economic future I wouldn't be posting here right now. But there's basically two points of view on this.
The first one recalls that Japan followed a very similar development trajectory, only to implode in the late 1980s. This argument holds that China's recent rise is temporary and the US has nothing to worry about -- similar to what happened after Japan collapsed, the US will resume its predominant position in the order of things.
The second one notes that China's government so far appears to be managing its economic rise quite well, and more importantly has a lot more people to draw on, so its manufacturing advantage in terms of labor costs could potentially last a lot longer than Japan's did. Based strictly population, China would have four times the GDP of the US by the time its GDP/capita (a rough proxy for labor cost) equals the US. This means this situation could last for decades. Whether this is harmful or not is really a matter of how you view China's intentions. If they played according to WTO rules, there's no economic reason why we couldn't keep producing services (financial and otherwise) and trading them with China for goods. The problem, of course, is China hasn't always obeyed WTO rules in the past.
A longer-term POV, of course, would note that third countries -- India, Vietnam, Malaysia, etc. -- are also rising to compete with even lower labor costs, which suggests there may be no opening in the forest anytime soon. Of course, this isn't necessarily a bad thing -- it does mean that billions of people are being pulled out of poverty.
The first one recalls that Japan followed a very similar development trajectory, only to implode in the late 1980s. This argument holds that China's recent rise is temporary and the US has nothing to worry about -- similar to what happened after Japan collapsed, the US will resume its predominant position in the order of things.
The second one notes that China's government so far appears to be managing its economic rise quite well, and more importantly has a lot more people to draw on, so its manufacturing advantage in terms of labor costs could potentially last a lot longer than Japan's did. Based strictly population, China would have four times the GDP of the US by the time its GDP/capita (a rough proxy for labor cost) equals the US. This means this situation could last for decades. Whether this is harmful or not is really a matter of how you view China's intentions. If they played according to WTO rules, there's no economic reason why we couldn't keep producing services (financial and otherwise) and trading them with China for goods. The problem, of course, is China hasn't always obeyed WTO rules in the past.
A longer-term POV, of course, would note that third countries -- India, Vietnam, Malaysia, etc. -- are also rising to compete with even lower labor costs, which suggests there may be no opening in the forest anytime soon. Of course, this isn't necessarily a bad thing -- it does mean that billions of people are being pulled out of poverty.