More and more people in the United States are increasingly concerned about, even obsessed with, the emerging global economic dominance of China, which is also regarded by many around the world as the most important single global economic issue.
The issue is analyzed and discussed from alternative viewpoints in various Western media and academic literature with different levels of urgency and apprehension. I wish to share with my readers a controversial contribution that sheds light on this critical issue. Arvind Subramanian, an Indian citizen who worked at the International Monetary Fund (IMF) before becoming a senior fellow jointly at the Peterson Institute of International Economics (PIIE) and the Center for Global Development (CGD) in Washington, D.C., argues in his article “The Inevitable Superpower: Why China's Dominance Is a Sure Thing” in the latest issue of Foreign Affairs (September/October 2011) that China is about to become economically dominant, sharing global economic dominance with the US for now, but will capture that dominance exclusively in about 20 years.
Subramanian expects this to happen even though China's economic growth will slow down to around 7 percent per year from about 11 percent it achieved in the last decade. The US economy, however, is projected optimistically to grow at about 2.5 percent per year, its average rate over the last three decades. In two decades, China's share of the global gross domestic product (GDP) will be close to 20 percent, whereas the US's share will be just under 15 percent. China's GDP per capita in purchasing power will be more than half of the US and higher than the global GDP per capita. China's share of world trade, at 15 percent, will be double that of the US. The Chinese renminbi will become a credible rival to the US dollar as the principal global reserve currency. Subramanian's major conclusion is sobering: “By 2030, relative US decline will have yielded not a multipolar world but a near-unipolar one dominated by China.” It is also controversial because his projection of China's economic dominance is more imminent, more substantial and more diverse than what the conventional wisdom informs us.
Subramanian defines economic dominance as “the ability of a state to use economic means to get other countries to do what it wants or to prevent them from forcing it to do what it does not want.” Economic dominance depends on several factors such as a country's economic size, international trade and investment patterns, domestic and foreign financial health, military power and the global status of its currency. In his forthcoming book “Eclipse: Living in the Shadow of China's Economic Dominance,” which will be published by the PIIE Press, Subramanian develops an index of dominance which combines only three factors: a country's GDP, its international trade (as the sum of merchandise exports and imports) and its status as net creditor to the rest of the world. He argues that all other factors, such as military prowess, currency status and fiscal strength, are largely derived from these three basic factors. (The US Defense Department's 83-page latest annual report to Congress titled “Military and Security Developments Involving the People's Republic of China 2010,” released last Tuesday, reveals the deepening US concern about China's growing military power attributed to its rapid economic growth and development.)
Subramanian advises the US to act with greater humility and to stop deluding itself that it can continue indefinitely to exert global economic dominance as it had done since the end of World War II. Contrary to what many in the US believe, he argues that it is not entirely or even mostly up to the US to maintain and strengthen its economic dominance by putting its own problem-permeated house in order. Although he admits that the US has unique national characteristics and strengths such as its can-do attitude, social dynamism, technological innovativeness and creative entrepreneurship, its structural problems, such as lower socio-economic mobility, widening income and wealth inequalities, a troubled middle class, a fragile financial system, growing fiscal deficits and a crushing national debt, are too many and too hard to overcome based on those unique characteristics and strengths. He believes that even a resurgent US could not wield power over and dominate a rising China. He draws an intriguing parallel between how the US, as the global hegemon, wielded supremacy and dominated the United Kingdom, the declining global power, during the Suez crisis in 1956 and how China, the world's largest creditor nation with over $3 trillion in foreign exchange reserves, mostly in US dollars, could do something similar to the US during another global financial crisis, forcing the US to accept its several economic and non-economic demands. He is persuasive that this scenario is not pure fantasy.
According to Subramanian, the challenge for the US and the rest of the world is to engage China in constructive coalitions and tether it to the multilateral system of global economic governance so that it does not become a malign hegemon. Although I find his analysis incisive and provocative, I believe that Subramanian underestimates the will and capacity of the US to cope with its admittedly serious problems through sweeping reforms as it had done in the past. He also overestimates the ability of China to maintain its national unity, political stability and strong central government under the single party rule of the corruption-ridden Communist Party in the face of mounting domestic economic, social and political demands for fundamental change. Even if Subramanian is right that the US cannot prevent the imminent global economic dominance of China, China itself could abort its phenomenal rise as a global power without ever achieving and maintaining such dominance. China's long history of devastating civil disorder and self-inflicted wounds that held it back for centuries, despite its ancient advanced civilization, should make us at least a bit skeptical about its inexorable and imminent rise to global economic dominance.
Source: www.todayszaman.com
The issue is analyzed and discussed from alternative viewpoints in various Western media and academic literature with different levels of urgency and apprehension. I wish to share with my readers a controversial contribution that sheds light on this critical issue. Arvind Subramanian, an Indian citizen who worked at the International Monetary Fund (IMF) before becoming a senior fellow jointly at the Peterson Institute of International Economics (PIIE) and the Center for Global Development (CGD) in Washington, D.C., argues in his article “The Inevitable Superpower: Why China's Dominance Is a Sure Thing” in the latest issue of Foreign Affairs (September/October 2011) that China is about to become economically dominant, sharing global economic dominance with the US for now, but will capture that dominance exclusively in about 20 years.
Subramanian expects this to happen even though China's economic growth will slow down to around 7 percent per year from about 11 percent it achieved in the last decade. The US economy, however, is projected optimistically to grow at about 2.5 percent per year, its average rate over the last three decades. In two decades, China's share of the global gross domestic product (GDP) will be close to 20 percent, whereas the US's share will be just under 15 percent. China's GDP per capita in purchasing power will be more than half of the US and higher than the global GDP per capita. China's share of world trade, at 15 percent, will be double that of the US. The Chinese renminbi will become a credible rival to the US dollar as the principal global reserve currency. Subramanian's major conclusion is sobering: “By 2030, relative US decline will have yielded not a multipolar world but a near-unipolar one dominated by China.” It is also controversial because his projection of China's economic dominance is more imminent, more substantial and more diverse than what the conventional wisdom informs us.
Subramanian defines economic dominance as “the ability of a state to use economic means to get other countries to do what it wants or to prevent them from forcing it to do what it does not want.” Economic dominance depends on several factors such as a country's economic size, international trade and investment patterns, domestic and foreign financial health, military power and the global status of its currency. In his forthcoming book “Eclipse: Living in the Shadow of China's Economic Dominance,” which will be published by the PIIE Press, Subramanian develops an index of dominance which combines only three factors: a country's GDP, its international trade (as the sum of merchandise exports and imports) and its status as net creditor to the rest of the world. He argues that all other factors, such as military prowess, currency status and fiscal strength, are largely derived from these three basic factors. (The US Defense Department's 83-page latest annual report to Congress titled “Military and Security Developments Involving the People's Republic of China 2010,” released last Tuesday, reveals the deepening US concern about China's growing military power attributed to its rapid economic growth and development.)
Subramanian advises the US to act with greater humility and to stop deluding itself that it can continue indefinitely to exert global economic dominance as it had done since the end of World War II. Contrary to what many in the US believe, he argues that it is not entirely or even mostly up to the US to maintain and strengthen its economic dominance by putting its own problem-permeated house in order. Although he admits that the US has unique national characteristics and strengths such as its can-do attitude, social dynamism, technological innovativeness and creative entrepreneurship, its structural problems, such as lower socio-economic mobility, widening income and wealth inequalities, a troubled middle class, a fragile financial system, growing fiscal deficits and a crushing national debt, are too many and too hard to overcome based on those unique characteristics and strengths. He believes that even a resurgent US could not wield power over and dominate a rising China. He draws an intriguing parallel between how the US, as the global hegemon, wielded supremacy and dominated the United Kingdom, the declining global power, during the Suez crisis in 1956 and how China, the world's largest creditor nation with over $3 trillion in foreign exchange reserves, mostly in US dollars, could do something similar to the US during another global financial crisis, forcing the US to accept its several economic and non-economic demands. He is persuasive that this scenario is not pure fantasy.
According to Subramanian, the challenge for the US and the rest of the world is to engage China in constructive coalitions and tether it to the multilateral system of global economic governance so that it does not become a malign hegemon. Although I find his analysis incisive and provocative, I believe that Subramanian underestimates the will and capacity of the US to cope with its admittedly serious problems through sweeping reforms as it had done in the past. He also overestimates the ability of China to maintain its national unity, political stability and strong central government under the single party rule of the corruption-ridden Communist Party in the face of mounting domestic economic, social and political demands for fundamental change. Even if Subramanian is right that the US cannot prevent the imminent global economic dominance of China, China itself could abort its phenomenal rise as a global power without ever achieving and maintaining such dominance. China's long history of devastating civil disorder and self-inflicted wounds that held it back for centuries, despite its ancient advanced civilization, should make us at least a bit skeptical about its inexorable and imminent rise to global economic dominance.
Source: www.todayszaman.com
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