Economics Index and Qualifications
By Richard Bruce BA, MA, and PhC in Economics
Former Instructor St. John's University, New York City

China vs. America who's number 1, in what areas. Some surprises.

In 2012 China produced 15.5 million cars, more than any other country, upwards of twice second place, Japan, close to three times third place, Germany, and almost four times as many as fifth place, America.

Yes, you read that right, America, the land of the automobile is now in fifth place, slightly behind South Korea. But, that was better than the previous year 2011 when America was in sixth place, behind India. 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 Americans. So many of these cars are 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.

By both of the commonly used methods of measurement, ordinary exchange rates, and purchasing power parity, the USA still has the largest economy.

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.

Using purchasing power parity the Chinese economy was 78% of the American economy in 2012, almost four fifths. But this is being written in August 2013. Mid 2012 was a little over one year before this was written, and China is rapidly catching up. In 2008 the Chinese economy was 57% of the American, in 2009 65%, in 2010 69%, in 2011 74%. So China is much closer to catching up to America and will probably pass the USA quite soon.

Using regular exchange rates the Chinese economy was 49% of the American economy in 2012. The rate that it is catching up measured with regular exchange rates is even faster. In 2008 China's economy was 28% of the American, in 2009 34%, in 2010 39%, and in 2011 44%.

I calculated this using World Bank data. Using what is probably more up to date statistics from China is already at 52% of the American level.

By both measures China is closing the gap quickly, but there are other narrow and admittedly less significant measures by which they are already ahead. One negative measure is carbon footprint. China produces more carbon dioxide in total than any country, in 2009 they were already producing 45% more than the United States. The United States was still producing several times as much carbon dioxide per person, but the Swedes and the French have highly productive first world economies and their carbon footprint per person is less than China's. Whats even more, the per person carbon footprint of Sweden, France, and the United States is decreasing while China's is rising rapidly. All this is based on figures for 2008 and 2009, things may have improved since then.

Electricity usage is another measure of economic development. In 2010 China was roughly equal to the United States, but rising rapidly.

Moving beyond industry to the future, information, China in 2011 already had twice as many Internet users as the United States, and of course the Chinese numbers are rising very rapidly while America's are relatively stagnant.

On the other hand the average American user maybe spending far more time on the Internet than the average Chinese user. The American user may have the Internet at home, at the office, and in his pocket, or her handbag when they are on the go. While the Chinese user maybe able to rent an occasional few minutes at an Internet cafe.

If we look at the most used web sites they are clearly dominated by English language sites directed at Americans, though Chinese sites are working there way toward the top of the international rankings.

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 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 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.

How will the 3rd world develop? This popular web page lays out the growth path.

Here is an index to my other pages on economics, and a short review of my qualifications in this field.

Tell me what you think. Here is my contact information..