Decline is a choice, so is Progress

The conventional wisdom is that China is on the rise, the United States is in decline and the world as we know it is going to end, or something to that effect. As I have mention before, decline is a choice and there is no doubt that if present economic policies don’t change, the United States will decline economically, and along with that decline, our world status will decline as well.

I made the observation in a recent column that China behaves more like a teenager out on a joy ride with the family car and couple of beers in the front yard as opposed to a civilization that has lasted 3000 years. The Chinese are definitely feeling their oats and making it clear that China will challenge what it feels is the United States hegemony.

It should be pointed out that to have one world superpower is an anomaly and not the usual state of affairs. However, there is nothing that can stop the United States from being the premier superpower among superpowers in the 21st century as more countries advance to join the world stage.

Mercatus Center at George Mason University recently published a study challenging the conventional wisdom that China will become the dominant power in the 21st century. The author, Jack Goldstone, noted, “THE LAST DECADE has seen the arrival of emerging markets, and investors and pundits alike have shown unbounded excitement about the BRICs—Brazil, Russia, India, and China—as the new sources of the world’s economic growth. However, a focus on the BRICs is already out of date. In half of these countries, demographic patterns have shifted, and the future of the world’s growth now looks set to come from a different set of emerging economies, the TIMBIs: Turkey, Indonesia, Mexico, Brazil, and India.”

Goldstone observed that with the output measured at current exchange rates, the United States is still two and half times beyond the Chinese, and much of the data supporting China overtaking the United States is based on the premise that the present slow growth of the United States will continue along with the ten percent annual growth of China continuing indefinitely.

What is missing from this picture is that China's pro-natalist policy of Mao has been replaced by a stringent one child policy. Population control, designed to allow Chinese to better use their resources among a smaller number of citizen, is also affecting its future workforce.

Up until now, the Chinese workforce grew and allowed more production but the one child policy will produce a declining workforce in the future. Along with Russia, China's workforce will not grow but decline. (The Russian workforce is already experiencing a reduction and along with its overall population.) Europe in general is declining in population but major countries like Indonesia, Turkey, Mexico, Brazil and India will see continued increases in workforce as more individuals will enter in ever increasing number.

What does this mean? Goldstone explains, “With demographic trends no longer so favorable to growth, China’s productivity gains will have to come primarily from increasing capital per worker and innovation in technology. China’s leaders understand this all too well, but the prognosis is not good. A recent report by IBM on international use of the latest business technologies placed China at 83rd out of 134 countries—as against 43rd for India and 58th for Brazil. Authoritarian countries have never been a flourishing base for innovation; new ideas come from free thinkers who question authorities and existing ways of doing things—hardly a welcome sight in China. The treatment of Nobel Laureate Liu Xiaobo indicates that freedom of expression is not on the agenda for China’s leaders.”

The more democratic aspect of Brazil and India governance will allow more innovation as free society tends to be more willing to tolerate entrepreneurs. Russia and China will attempt to increase productivity through government policies but the question is how effective government can be in producing productivity increases. Due to immigration, the United States will see its own workforce increase even though the percent increase will be less than in the past but still higher than China. (This should be a warning to restrictionists on immigration policies. A program that allows for legal immigration is an economic winner; especially in our economic competition with China.)

It should be pointed out that many of these nations mentioned have their own problems. Turkey is now run by an Islamist Party and the question is whether the more fundamentalist Muslim will interfere with the more secular pursuit of wealth and this is also true of Indonesia. India is plagued by sclerotic bureaucratic control that clog the entrepreneurial spirit of India, and Mexico is now dealing with a drug cartel civil war similar to what Colombia did in the 1990’s. Brazil presently is ruled by their leftist parties that so far have shown good judgment in their economic plan but the question remains, how long can the present leaderships resist their leftist tendency of increasing government control over the economy and slow their own growth down?

The United States is still poised to lead the world economically, if the right policies are followed and there is no guarantee that China or other powers will overtake the United States since they have their own problems that could derail their progress.

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