I’m traveling to Beijing this Thursday, so I need to write this blog entry…
First there was peak oil, the idea that has fascinated many since the 1970s that oil production was about to peak and then collapse, leaving our economy crippled. Then there was “peak everything” as it has been called, the regular doomsaying that everything from clean water to the ingredients of computer chips are running out.
The latest theory is “Peak China”, the idea that China’s booming economy is unsustainable and in fact is on the verge of a plateau and then a crash. The latest China doomsayer is none other than Nobel prizewinning economist Paul Krugman, who says that “China is in big trouble.”
But the fact is that China has been an economic powerhouse for 30 years, and trends that long don’t reverse overnight. China’s economy may sputter now and again, and its rate of growth will decline as its economy matures. This is inevitable, but the fundamentals of China are good and getting better. The Chinese are hardworking, smart, and well-organized, three ingredients that usually lead to success, regardless of whether resources are also abundant. Japan, Korea, Switzerland, Germany, and Scandanavia have also enjoyed great post-World War II success due to these factors.
Though 30 years spans several economic cycles, it’s a relatively short time in the lives of nations. It’s true that before China’s 20th century success, it had centuries of weakness. Japan rolled through China in World War II as if it was from a previous era, and it was. Un-industrialized and un-organized, the China of the 1930s and before was very different from the China of today. Colonized around the edges in Hong Kong, Macau, and Manchukuo, it drifted as a state. However, China’s sheer size and unified culture guaranteed that it survived. Indeed China has survived as a culture longer than almost any other culture in the world. After all, this is year 4711 in the Chinese calendar!
Many countries have emerged from the new post-World War II order as economic dynamos whereas before they were much less developed. Germany has developed into the strongest economy in Europe, while Japan, despite it’s lack of growth, remains the third economy in the world. No one thinks either of these countries will wither economically any time soon.
Others say that China can’t keep its repressive government as it develops a middle class, and that may be true. And of course, political upheaval is usually bad for economics. However, whatever form China’s government may take, it’s unlikely it will undo the economic progress of the post-war era.
While China’s growth may slow, and it may even suffer a revolution, China itself isn’t going anywhere. So why do people love to predict its demise? Reading between the lines of a piece like Krugman’s, one can’t help but sense the Schadenfreude. We are quite happy to feel sorry for China. I think it’s because we don’t understand how so many people can work so hard for so long for so little. We just don’t think it’ possible they can outdo us at our own game, i.e. capitalism. But sour grapes was never the basis of a sound economic theory.
We need to get used to the idea that China is here to stay, probably for another 4711 years.