The US economy has been the world largest
since 1872 when it overtook the UK’s. A
heckuva run, no doubt. But that may end
this year, according to the Financial Times:
The US is on the brink of losing its status as
the world’s largest economy, and is likely to
slip behind China this year, sooner than
widely anticipated, according to the world’s
leading statistical agencies.
Both economies will have gross domestic
products of around $16 trillion when you
adjust for “purchasing power parity,” or the
much cheaper cost of living in China.
Economists previously thought China would
pull ahead by 2019, but the glacial US
recovery has allowed the gap to narrow
more quickly. (All this analysis, of course,
depends on the accuracy of Chinese
economic statistics.)
Some important context here: on a per
person basis, PPP GDP is $51,000 in the US
vs. $11,000 in China. Anyway you slice the
data, China is still a much poorer nation than
America. (More than 30 million Chinese,
basically the population of Texas, live in
caves.) And at market rates, the US economy
is about twice as large as China’s. Also note
that within two decades or so, China will
have an older population than the United
States. The Middle Kingdom has become old
before it has become rich. In addition to
demographic problems, China is still trying
to transition to a sustainable, consumer-
driven growth model. So the other team has
its problems, too.
Now here is what the FT’s headline, “China
poised to pass US as world’s leading
economic power this year,” really gets
wrong. The US remains the world’s leading
economic power due to its technological
innovation. Most global innovation surveys
put the US at or near the top. For instance,
the World Economic Forum ranks the US as
the 7th most innovative economy, China the
32nd. Bloomberg puts the US at third, while
China did not make the top 30. And which
global economy is most critical to
expanding the technological frontier, say,
Sweden, Bloomberg’s #2 ranked economy
with a population of 9.5 million and a $400
billion economy, or the #3 US with its 315
million people and $16 trillion economy.
Pound for pound, no nation innovates like
America. It’s our deep magic, and a
competitive advantage we should be
careful not to squander.
http://www.aei-ideas.org/2014/04/sorry-china-the-us-is-still-the-worlds-leading-economic-power/