Per-Capita, the U.S. is a Century Ahead of China | Hacker News Reader

Per-Capita, the U.S. is a Century Ahead of China

mjperry.blogspot.com

36 pointscwan34 comments

The statement in the title is rather disingenuous. There have been quite a few countries in the past few decades that have achieved much higher rates of growth than the US did. For example, South Korea started out after the Korean War so poor that Ethiopia(!) sent it aid. Now, they are a highly developed nation and their GDP per capita is on par with southern European countries, such as Italy, and will probably surpass them very soon.

Now, the obvious argument against China imitating the growth of a country like SK is that SK is small enough that it was able to grow at a phenomenal rate by focusing on exports, whereas China's size inherently precludes it from that particular luxury. However, many other things, particularly in terms of technology, have changed since the last "big" country (the US) became industrialized. It just may be possible for China to achieve organic growth at much higher levels than the US enjoyed during the 20th century.

Very true. There are a long list of countries that have grown much faster than the US did during this period because catchup growth tends to be much faster than being in the lead. Look at how quickly Japan went from being roughly where China is to being a peer of the US, for instance.

This isn't a prophesy, and there are many things that could prevent it - Great Leap Forward 2.0, devastating war, etc. But fast growth is very much an achievable proposition for China.

I attended a talk recently by Justin Yifu Lin, the current chief economist of the World Bank. On the basis of a comparison of China's current Purchasing Power Parity to that of earlier Asian tigers, he argued that China's economy is likely to grow at a rate of 8% p.a. for the next two decades.

He also argued that Africa will move into the cheap manufacturing jobs that are now becoming more expensive in the China. Not sure how that squares with his projected growth for the Chinese economy; presumably they will grow in the "knowledge economies." They are certainly trying to... If that's the case, knowledge workers in the West (which includes most readers of HN) may be in for some serious economic disruption.

From what I know, rent in Beijing is very expensive, on par with the bay area or worse and wages are not dramatically lower for anybody who's in china and is somewhat competent. It's not the vast price difference gulf between a US factory worker and the peanuts that a chinese factory worker gets.

What will happen after the chinese property bubble bursts and to everyones rent could change things although.

"He also argued that Africa will move into the cheap manufacturing jobs that are now becoming more expensive in the China."

To play a counterpoint, that will require various African nations to put into effect a strong strategy for an export driven economy. While "Africa" has a billion or so people, it's not a monolithic nation-state. Some countries with better governance may go that route, others may not, and others may end up with a continuous string of dictatorial regimes and corrupt governments and accomplish nothing.

In 20 years, there may still be more poor Chinese peasants looking for cheap factory work than available Africans looking for comparable factory work in countries that have switched to an appropriate economic model. It's also not entirely clear that the Asian export-driven model will work elsewhere. http://en.wikipedia.org/wiki/Export-oriented_industrializati...

The title of the article compares the current condition in China to the condition in the United States a century ago and provides some perspective on just how much stark poverty there still is in China.

Anybody who could reliably predict long-term economic trends could make huge piles of money as an investor. As the old saying goes, "The market can remain irrational longer than you can remain solvent," which is why predicting those long-term trends is so difficult. A while ago, something reminded me about my life experience in the 1980s, when I was already an adult living in east Asia and a lot of Americans thought that Japan would soon have the world's dominant economy. Compared to many countries, Japan is very prosperous indeed today, but trends predicted for Japan in the late 1980s were not realized in the 1990s or the first decade of the twenty-first century. Maybe China will have a VERY long-term trend of steady economic growth, but to do so it will have to resolve political issues that are easier to resolve in a political system like that of Japan or that of the United States than a nonrepresentative system without an independent judiciary like that of China.

If we wanted to talk about REALLY long-term trends, we might consider the risk that China will return to its frequently encountered condition of being split into separate warring countries that don't enjoy the advantages of a common national economy. That was China's condition in the 1930s and 1940s, and it has often been China's condition in other eras. Conditions in Tibet and in Eastern Turkistan may matter as much for China's future as the import market in the European Union.

> Now, the obvious argument against China imitating the growth of a country like SK is that SK is small enough that it was able to grow at a phenomenal rate ...

Really? I would think the obvious argument against China growing at the same rate would be a consistent application of laws, respect of property rights, and some form of political maturity. Granted, China is improving on all of those factors, but they still have such a long way to go and that is what will hamper their growth.

As opposed to early south korea? Didn't they only start the whole elections thing in the last 20-30 years?

No, read up on South Korean history-their export oriented economy was originally constructed during the 1970s by US-backed dictator Park Chung-hee. SK has only been democratic for about 20 years.

China and its economy are virtually in the hands of around 500 top families, they are mostly senior communist officials or their descendants. They controlled most of the resources and state-run enterprises which are all in monopoly position in their own industry. 80% of the wealth generated nationally are distributed among themselves, rather than giving back to improve education, healthcare, social welfare.

It's not a growth model that is likely to maintain for long.

Actually, according GINI coefficient (going by the World Bank numbers), China has about the same overall wealth inequality as the US: http://en.wikipedia.org/wiki/List_of_countries_by_income_equ... and is actually on par with such relatively well functioning countries as Turkey and Singapore.

Of course this doesn't translate that well to on the ground conditions, and their top 10% and top 20% share are still very high, but probably not high enough to significantly impact growth. (Now if that cascades into political problems, that's a different matter...)

Almost all long-term economic planning is in the hands of relatively few government officials, but wealth appears to be reasonably well distributed for a country _at their stage of development_. It's certainly not all in the hands of a few thousand people, since the top 20% would be a few hundred million.

Incredibly disingenuous title. Yes, China has the same real gdp per capita (PPP) that the US had in 1912. Except almost all of the United States' growth had to come from technological advances - doing things that were not known in 1912. China has the luxury that it can merely leverage known technology, allowing it to grow far more rapidly - It's infinitely easier to give all of your farmers tractors after tractors have been invented.

Now don't get me wrong; it will still take China 40+ years to catch up to where the US is today is on a per-capita basis, but it is hardly as far away as the author makes it seem.

There is far more to growth than technology. You are taking some things for granted. In 1912, the US already had a mature political and legal environment. It had a healthy respect for property rights. You can't say the same of China today.

By this logic, California is 50 years ahead of Alabama, and New York is 10 years ahead of California.

Let's not legitimize this silly article with obviously true corollaries like the above

The article's point, if taken with the appropriate grain of salt, is interesting. Driving through rural, economically depressed America is like taking a time machine to an earlier, less affluent time (before economic productivity increases led to increases in the standard of living).

Note that even a few years ago, much of the country still used dial-up, yet most of us on HN have probably had fast internet for 12+ years.

If my standard of living increased by 1.5x I'd consider the $200/month broadband option totally reasonable for home internet, yet today I settle for Comcast's mid level option.

This brings to mind an interesting point- economic migration. An Alabaman(?) wanting to set up a start up is likely to move to california or new york- suppressing the GDP of Alabama and increasing it for CA/NY. The same migration applies to the already-rich.

Similarly, on an international scale, the USA is likely to be the destination of choice today. So as we see China begin to surpass the USA economically, the effect of any change of 'preferred economic migration destination' will likely amplify the natural GDP changes.

Yes! George Friedman (of recent Stratfor infamy) argues that within 50 years the US will face a drastic shortage of workers and will set up immigration recruitment programs.

Since there are about 1 billion more people in China than the US, what does it mean when about 300 million Chinese have the majority of wealth in a 15-20 trillion dollar GDP economy?

It means that there are a ton of farmers in rural China that are barely scraping by. It also means that there are a ton of factory workers in the cities that are making very tiny wages.

The point of this article is that while the GDP may be comparable to the US (to be fair, the GDP of China is actually less than half of the US [1]), the situation in China is not really a first-world (to use an outdated Cold War term) type of situation. There's a lot of poverty in China, and if the GDP per capita were on par with the US, we'd be looking at a $45-50T economy. The current China GDP is hovering below $7T at the moment, so they've got quite a ways to go.

[1]: http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomin...

> It means that there are a ton of farmers in rural China that are barely scraping by.

Exactly. One has to keep in mind that in China, citizens are not free to move about within the country as they please. The Hukou household registration system[0] prevents, for example, rural migrants from legally taking up residence in a more prosperous area, such as Beijing or Shanghai, without the government's permission (which is quite difficult to get for a poor person).

This has effectively created 2 Chinas - an urban one and a rural one. And just like we have here with Mexico and America, there are illegal immigrants from rural areas who live in secret in the urban areas, often working under inhumane conditions that they can't escape from without going to jail. The children of those who are officially rural residents are not permitted to enroll in urban schools, and thus forced to be separated from their parents and return to the parents' hometown to receive a formal education.

0: http://en.wikipedia.org/wiki/Hukou_system

1: http://en.wikipedia.org/wiki/Hukou_system#Effect_on_rural_wo...

That is quite amazing to learn. How are the farmers not granted "citizenship" as it were, in their own country once they move to another part of it and presumably contribute to the local economy?

I think the thing to note here is that China is most definitely not like America. I think the common practice in the west is to think of China as an Asian version of a first world country, with a government that just censors things. That's not the case--China has an oppressive government. While they've been opening up commerce in the last few decades, that doesn't mean that they've adopted the western sense of freedom. There are a whole host of reasons why this is the case, but it's very important to note that while China is very visible in the world arena, it is still a developing nation.

The same thing was happening just 80 years ago in our own country:

> California was emphatically not the promised land of the migrants' dreams. Although the weather was comparatively balmy and farmers' fields were bountiful with produce, Californians also felt the effects of the Depression. Local and state infrastructures were already overburdened, and the steady stream of newly arriving migrants was more than the system could bear. After struggling to make it to California, many found themselves turned away at its borders.

http://memory.loc.gov/ammem/afctshtml/tsme.html

Consider also that when GPD of the richest 300m Chinese surpasses that of the GDP of the USA, that is the point at which the battle is essentially won in favour of China, because they will be a larger high-GDP market than the USA at that point (and with better prospects going forward). This point will come far before the GDP per capita is equal.

China and the U.S are in the same century (along with the rest of the world). The comparison is just ridiculous. Take for example, Qatar. So Qatar a decade ahead of the USA?

What you should compare on is the access to public (or private, who cares) to health care, states services, education, job opportunity, security...

The data on that graph looks bogus to me. I doubt they'd be able to assess per capita GDP year to year so accurately for the years before 1900.

Take for example the Taiping Rebellion which was from 1850 to 1864. Described by wikipedia: "About 20 million people died, mainly civilians, in one of the deadliest military conflicts in history."

Yet according to that graph is had little to no effect of the per capita GDP.

Is this an apt comparison considering the monumental US debt?

You can measure the cost of the debt yourself by taking into account the cost of interest payments. They're less than the tax rate.

Looking retrospectively and using language like 'century ahead' could lead one to believe it would take China 100 years to reach US 2011 levels. But at 9% compounded growth, that $8,400 becomes $50,000 in just 21 years.

Averages will also keep indicating that 'China' as whole is 'behind' the US even after China contains within itself the equivalent of 1-2 entire United States economies/income-distributions. (The averages will be dragged down because China will contain another 2-3 larger poorer economies as well.) Not so useful for understanding what's really happening.

Per capita GDP is one thing, a lot more important is per capita income. Those are two very different things, particularly when you're talking about China - a country with a billion extremely poor people, and a lot of mega corporations that the state has blessed with near monopolies. What you want to know, is: how much money are the people of China keeping out of that huge economy.

Per capita income in the US is closer to $40k, and in China it's closer to $3,600 to $4k. In 1990, it was closer to $350 to $450 range (IMF).

The focus always goes to China's per capita GDP, but it's a very misleading way to measure economic parity. People get upset about America's wealth inequality - China's wealth inequality is several orders of magnitude worse.

People get upset about America's wealth inequality - China's wealth inequality is several orders of magnitude worse.

Source? I'd like to see wealth (and income) inequality metrics for both countries.

You mean a country with 100 billionaires, the second largest economy, and 500 million people (40%) living on less than $2 per day? 130x million people living on $1 per day (both courtesy of the world bank)? 50% of the population without indoor plumbing (cia factbook)?

Not hard to source the extremely dire statistics. They're plentiful.

http://news.bbc.co.uk/2/hi/asia-pacific/8668086.stm

http://www.businessweek.com/magazine/content/11_06/b42140136...

> The focus always goes to China's per capita GDP, but it's a very misleading way to measure economic parity. People get upset about America's wealth inequality - China's wealth inequality is several orders of magnitude worse.

Relative wealth inequality is the wrong measure.

If I've got food and shelter, I'm better off than if I don't, no matter how much you have.

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