Article 43
Saturday, April 30, 2011
Bad Moon Rising Part 41 - 2016
When China Overtakes The US
After more than a century as the world’s largest economy, the US will need to adjust to its declining global hegemony.
By Mark Weisbrot
The Guardian UK
April 27, 2011
Various observers have noted this week that China’s economy will be BIGGER than that of the United States in 2016. This comes from the International Monetary Fund’s (IMF’s) latest PROJECTIONS,, which were made in its semi-annual April world economic outlook database. Since 2016 is just a few years away, and it will be the first time in more than a century that the United States will no longer be the world’s largest economy, this development will be the object of some discussion from various perspectives.
First, let’s consider the economics. China has been the world’s fastest growing economy for more than three decades, growing 17-fold in real (inflation-adjusted) terms since 1980. It is worth emphasising that most of this record growth took place (1980-2000) while the rest of the developing world was doing quite badly by implementing neoliberal policy changes indiscriminate opening to trade and capital flows, increasingly independent central banks, tighter (and often pro-cyclical) fiscal and monetary policies, and the abandonment of previously successful development strategies.
China clearly did not embrace these policy changes, which were promoted from Washington by institutions such as the IMF, World Bank, and later the WTO. (China did not even join the WTO until 2002.) It is true that China’s growth acceleration included a rapid expansion of trade and foreign investment. But these were heavily managed by the state, to make sure that they fitted in with the government’s development goals -quite the opposite of what happened in most other developing countries. China’s goals included producing for export markets, promoting higher levels of technology (with the goal of transferring technology from foreign enterprises to the domestic economy), hiring local residents for managerial and technical jobs, and not allowing foreign investments to compete with certain domestic industries.
China’s economy is still very much state-led, with the government controlling most of the financial system, the exchange rate, and about 44% of the assets of major industrial enterprises. That is why China was able to plow through the world recession with GDP growth of 9.8%, despite losing about 3.7 percentage points of GDP due to falling net exports.
Now for the politics and international implications. First, much of the discussion of China’s rise is written from a Washington perspective that is, from the perspective of an empire. From this view, China’s rise is a “threat”. Since this view sees the supremacy of Washington and its allies as good for the world, China’s rise is also seen as a threat to the world. It is assumed that China will become an empire like the United States, but will not be so “benevolent” as the United States is.
This view is not supported by the facts. To take just current and recent history, it is the United States that invaded Iraq, leading to an estimated million deaths, is occupying Afghanistan, bombing Pakistan and Libya, and threatening Iran. The United States’ and its allies’ control over many developing countries’ economic policies through the IMF, World Bank and other institutions has also caused a lot of damage over the past few decades.
So, a shift of power toward a more multipolar world is likely to give us a more PEACEFUL and just world. In fact, it is already happening: the majority of South America, for example, is now governed by democratic left governments that have produced positive reforms that benefit the majority - something that was practically impossible to achieve while Washington dominated the region. And of course, the vast majority of people in the United States also stand to benefit from a smaller US role in the world, as we transition back to a republic from an EMPIRE - less spending on senseless wars, fewer casualties, fewer enemies, less distraction from our real problems at home.
China’s foreign policy is mainly geared toward securing the raw materials and trade that will fuel its growth and development. This is done through commercial transactions. Of course, its corporations like those of the rich countries - have come under criticism in various countries. But China does not try to tell other countries what their foreign policy towards other countries, or their overall economic policies, should be as the United States often does. This is an important difference between a country that pursues its own national and economic interests, and an empire that seeks to impose its own order on the world.
It is always possible that China, once it becomes a rich country - and this is many years away - could develop imperial ambitions. But so far, its leadership seems to see China as a developing country seeking to become a high-income country, and doesn’t see a role for empire-building in this process. “Hide brilliance, cherish obscurity,” Chinese leader Deng Xioaping once said.
A few months ago, press reports, using an exchange rate measure of GDP, announced that China had become the world’s “second largest economy” just this year. But by a purchasing power parity (PPP) measure, which adjusts for the difference in many prices between China and the US, China had become the second largest economy years ago. A technical matter: if we measure China’s economy in dollars at current exchange rates, it reached $5.9tn in 2010, as compared with $14.7tn for the US. By a purchasing power parity measure, its economy reached $10.1tn in 2010. It is that measure that the IMF projects to grow to $18.98tn in 2016, putting the US in second place at $18.81tn.
However, it is likely that even the IMF’s PPP measure understates China’s GDP: economist Arvind Subramanian has estimated that China’s PPP GDP in 2010 was already about even with that of the United States. An IMF spokesperson, quoted this week by the Financial Times, weighed in on the debate:
“The IMF considers that GDP in purchase power parity (PPP) terms is not the most appropriate measure for comparing the relative size of countries to the global economy, because PPP price levels are influenced by non-traded services, which are more relevant domestically than globally ֖ The Fund believes that GDP at market rates is a more relevant comparison. Under this metric, the US is currently 130% bigger than China, and will still be 70% larger by 2016.”
It is true that the “market rate” measure is better for some comparisons. But one important place where the PPP measure is more relevant is in military spending. The cost of producing a military plane and training a pilot in China is much lower than in the United States. Washington’s current policy is to maintain military supremacy in Asia, but an arms race with China could make the cold war look cheap by comparison. The Soviet Union’s economy was just a quarter of United States’ economy when we had that arms race. If the US were to have a serious arms race with China, we could forget about Medicare, social security and most of what our federal government spends money on.
Fortunately, a new cold war with China is not in the cards for now. But the size of China’s economy is another good reason to make sure that it doesn’t happen.
Bad Moon Rising
Part 1 - Part 2 - Part 3 - Part 4 - Part 5
Part 6 - Part 7 - Part 8 - Part 9 - Part 10
Part 11 - Part 12 - Part 13 - Part 14 - Part 15
Part 16 - Part 17 - Part 18 - Part 19 - Part 20
Part 21 - Part 22 - Part 23 - Part 24 - Part 25
Part 26 - Part 27 - Part 28 - Part 29 - Part 30
Part 31 - Part 32 - Part 33 - Part 34 - Part 35
Part 36 - Part 37 - Part 38 - Part 39 - Part 40
Part 41 - Part 42 - Part 43 - Part 44 - Part 45
Part 46 - Part 47 - Part 48 - Part 49 - Part 50
Part 51 - Part 52 - Part 53 - Part 54
Section Bad Moon Rising •
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Sunday, April 24, 2011
The Class of 2011
High unemployment among new college graduates in particular underscores the fact that todays unemployment problem did not arise because workers don’t have the right skills. Nor is high unemployment for well-educated young workers the result of a mass shift among undergraduates toward the wrong major, a lack of motivation or work ethic, or even lack of skills in finding jobs. The class of 2011 is one of the many casualties of a lack of demand for workers in the overall economy. When recovery comes to the broader labor market, it will come to the youth labor market as well. Unfortunately, most economic indicators suggest that such a recovery will be excruciatingly slow.
- Heidi Shierholz , EPI
Young workers face a dire labor market without a safety net
By Heidi Shierholz and Kathryn Anne Edwards
Economic Policy Institute
April 20, 2011
The Great Recession left a crater in the labor market that has been devastating for unemployed Americans of all ages. After more than two years of unemployment at well over 8%, we have a hole of more than 11 million jobs, with average spells of unemployment lasting nearly nine months. But the weak labor market has been particularly tough on young workers. In 2010, the unemployment rate for workers age 16-24 was 18.4% - the worst on record in the 60 years that this data has been tracked. Though the labor market has started to slowly recover, the prospects for young high school and college graduates remain grim. This BRIEFING PAPER examines the dire labor market confronting young workers and concludes with ways that government policy could help. Specifically, our analyses found the following for calendar year 2010:
· The unemployment rate for 16- to 24-year-old workers averaged 18.4%, compared with 9.6% for U.S. workers overall.
· Young high school graduates have been hardest hit: The unemployment rate for high school graduates under age 25 who were not enrolled in school was 22.5%, compared with 9.3% for college graduates of the same age.
· Young high school graduates are not keeping pace with their older peers: Their 22.5% unemployment rate is more than double the 10.3% rate among high school graduates age 25 and older.
· While their degrees afford them more opportunities in the labor market than other young workers, young college graduates still lag far behind older college-educated workers: 9.3% of them are unemployed, more than double the 4.7% unemployment rate for college graduates age 25 and older.
· Since unemployment among young college graduates still shows no improvement, the class of 2011 will likely face the highest unemployment rate for young college graduates since the Great Recession began.
· Young blacks and Hispanics are suffering disproportionately. The unemployment rate for black high school graduates under age 25 and not enrolled in school was 31.8%, compared with 22.8% for Hispanic high school graduates and 20.3% for white high school graduates. The unemployment rate for young black college graduates was 19.0%, compared with 13.8% for young Hispanic graduates and 8.4% for young white graduates.
· Young workers as a group have not been sheltering in schoolӔ during this downturn. School enrollment rates since the start of the Great Recession have not increased by noticeably more than the long-term trend.
Section Dying America •
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Thursday, April 07, 2011
Jobs Picture March 2011
Why the Middle-Aged Are Missing Out on New Jobs
By Rick Newman
Yahoo
April 1, 2011
Jobs are back. Just not for everybody.
Like many other things in the stutter-step economic recovery, the job market is finally recovering, but progress is uneven and some people are being left out. The latest jobs report, for example, shows that the economy created 216,000 jobs in March, for a total of about 1.9 million new jobs since employment levels bottomed out at the end of 2009. That’s a healthy pace of job growth that will help bring down the uncomfortably high unemployment rate, and, with luck, cement the recovery.
But digging into the numbers reveals some of the unusual ways that work and retirement may be permanently changing for millions of Americans. Most of the new jobs created since the end of 2009, for one thing, are going to workers under the age of 34, or over the age of 55. Employment levels for middle-aged workers, meanwhile, are stagnant or still falling. Here’s a breakdown:
Age group- Job gains last 15 months - Unemployment rate
All adults 16 and over 1.9 million 8.8%
16 - 24 490,000 17.6%
25 - 34 709,000 9.1%
35 - 44 -143,000 7.2%
45 - 54 -454,000 7.1%
55 and over 1.3 million 3.1%
Section Dealing with Layoff •
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