Yes, you read that right, America, the land of the automobile is now in fourth place, slightly ahead of South Korea and India. America was trailing both South Korea and India in 2011 but America recovered and is now back up to sixth place. Yea, America is back, we passed India, in car production.
Actually, things are not quite as dire as they look. America is still second in total number of motor vehicles produced, behind China, and ahead of Japan. We do not produce many cars but we produce lots of commercial vehicles, read trucks. Trucks can include minivans, SUVs, and pickup trucks. The fact that official statistics call these commercial vehicles, does not mean we use them for commerce.
Furthermore, the motor vehicles we produce are probably much more expensive than what the Chinese produce, first of all because so many of them are trucks, and even our small trucks: pickups, SUVs, and vans are usually larger and more expensive than cars, but also because the Chinese cars are being produced for the Chinese, who are still much poorer than America's. Many of the Chinese cars are no doubt cheap little econoboxes. The fact that we in the United States are not buying many of those cheap econoboxes suggests strongly that the quality is very low. For First World buyers a good used car is the better option. Here is a Forbes article on why the Chinese are not selling cars in the USA.
It is likely that in total value of all vehicles made by America still holds the lead over all other countries, but relative to China it is likely to be a rapidly shrinking lead.
Already, and perhaps much more in the next few years, we are likely see a lot of interest in our rapidly shrinking lead over the Chinese.
There are two commonly used methods of measuring the size of an economy, ordinary exchange rates and purchasing power parity. China lead the USA in 2016 using purchasing power parity. The USA lead China by 59% using ordinary exchange rates.
Purchasing power parity attempts to correct for differences in prices. Hair cuts are not traded between the United States and China. They are far more expensive in the United States which increases the measured size of the US economy.
Ordinary exchange rates are determined by goods like oil, wheat, cars, and clothing that are traded between countries. Usually goods produced on farms and in factories are traded, but services are not. Poorer nations have higher measured income by purchasing power parity because services like haircuts are much cheaper in those countries. The figures using ordinary exchange rates are reported by the World Bank. They call this the Atlas method. It is actually slightly different from ordinary exchange rates, but I will spare you the details.
China is already ahead the US by several other measures. One negative measure is carbon footprint. China produces more carbon dioxide in total than any country. In 2014 they were already producing almost twice as much as the United States. The United States was still producing more than twice as much carbon dioxide per person, but the French have a highly productive first world economy and their carbon footprint per person is less than China's.
Electricity usage is another measure of economic development. In 2014 China lead the US in electricity production by more than thirty percent.
Moving beyond industry to the future, information, China in 2017 has two and a half times as many Internet users as the United States, and of course the Chinese numbers are rising very rapidly while America's are relatively stagnant.
Going from the future to the past, lets look at land and agriculture. The land area of both countries is similar, but a larger portion of America is farm land, as opposed to China which is largely desert and mountains. According to the figures that China puts out the US has about twice as much farm land, but our spy satellites tell us that the Chinese actually have twenty to forty percent more land in crops than they say they have.
Returning to the topic of the economy as a whole, for the future it seems likely that China will pass the US, and they probably do not need to liberalize their system to do that. The key point is China has more than four times the American population, so they do not have to be as productive as America to pass America they only have to be one quarter as productive.
Sure our freedom makes us creative, and you have to be creative to get ahead of the other countries in per person economic output, unless you have oil, or another natural resource, but it is not that hard to become half as productive just by copying the other guy.
America's strength is that in addition to its own productivity it has a huge system of alliances. The combined population of America and its First World allies rivals that of China, and it is likely to be impossible for China to catch up without liberalizing their system. If they do that then the competition is reduced to a symbolic issue. Developed industrial democracies are politically stable and never fight wars with one another, a liberal China will be a safe China.
But alliances do have a notable weakness. The alliances members often try to get each other to make the sacrifices, while making small sacrifices themselves. One country with a big economy can win against many small countries, even if those smaller counties have a larger combined economic output.
Of course, these days even dictatorships generally avoid armed conflict, so we can always hope that the Chinese will see the advantages of keeping the peace. Particularly in the case of China they have far more to gain through peaceful trade than conflict. Furthermore, the Chinese give a lot of evidence of being a practical people with a practical leadership. So yes, it would probably work, but still it is worry some to have an authoritarian country with a larger economy than any democracy.
Here is an index to my other pages on economics, and a short review of my qualifications in this field.
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List of Free and Developed Nations Has your country made the club?
Irony and Song
This is my most popular economics page. A hopeful look at the prospects for the growth of the 3rd World.
How the 3rd World will become 1st World
A newer look at the prospects for 3rd World growth.
Gates says the low income category will be largely empty by 2035 This explains why he is right.
More Development Economics-Special Topics
Family farms thrive with factories die without them.