Why China and India Will Soon Dominate the World - Will Our Political Class Do Anything About it?
By Bruno Korschek
If you look at some statistics from the U.S. Census organization, the CIA Fact Book, and several other credible sources and put them together in a "what-if" analysis regarding the future economic power of Russia, China, India, and the United States, you can develop the following statistical measures:
- The current population of the United States is about 310 million people, the 2050 estimated population is expected to grow about 42% to 439 million, the current GDP of the United States is about $14.43 trillion dollars which yields a current GDP to current population ratio of about $46,561 per person ($14.43 trillion divided by 310 million people).
- The current population of Russia is about 143 million people, the 2050 estimated population is expected to shrink 23% to 109 million people, the current GDP of Russia is about $1.24 trillion, yielding a GDP to population ratio of about $8681.
- The current population of China is about 1.34 billion people, the 2050 estimated population is expected to grow about 9% to 1.46 billion people, the current GDP of China is about $4.8 billion, yielding a GDP to population ratio of about $3,595.
- The current population of India is about 1.2 billion people, the 2050 estimated population is expected to grow about 53% to 1.81 billion people, the current GDP of India is about $1.1 trillion, yielding a GDP to population ratio of about $925.
Not unexpected, the United States is the richest country in the world as measured by gross GDP and GDP per citizen. However, the growth of the United States economy is pretty steady and conservative vs. countries like China and India. Let's play some games with these base numbers:
- Let's assume, and there is no reason to believe otherwise, that China continues to grow very quickly over the next forty years. If the Chinese are able to get their GDP to population ratio up to half of what the current U.S. ratio is, then the total size of the Chinese economy as measured by GDP (in today's dollars) would be over $34 trillion, almost two and half times the size of the U.S. economy.
- Let's do the same thing with India but assume that the ratio is so low that they can only get their ratio up to one quarter of what the current U.S. ratio is, then the total size of the Indian economy as measured by GDP (in today's dollars) would be over $21 trillion, 50% larger than the size of the U.S. economy.
- We will not do the same analysis for Russia since given how fast its population base is shrinking, its economic impact in the world economy will be less and less over time.
Thus, the upside for both the Chinese and Indian markets are very high based on the sheer number of citizens in each country and their governments' desire to aggressively grow their economies. Before we know it, both economies could be approaching and/or surpassing the size and power of the United States economy.
If you do not believe these calculations, consider a recent article from the Financial Times that was summarized in the July 30, 2010 issue of The Week magazine. According to the Financial Times, China is now the biggest consumer of energy, passing the United States last year as reported by the International Energy Agency. As late as the year 2000, the United States used twice the energy that China used. Now, China is using at least 4% more than us.
Another source. In a recent feature section in Fortune magazine, Goldman Sach's was quoted as estimating that by the year 2050, the size of the Chinese economy will be about $70 billion while the size of the U.S. economy will be only about $40 billion and just barely ahead of the Indian economy. By 2050, Brazil, Russia, India, and China will exceed the greenhouse emissions of the rest of the developed world.
All of these numbers point to the same conclusion: namely that China and India will become much, much stronger in the coming years and much more competitive, both for raw materials, finished products, and markets to sell their products. The United States needs to take some long term strategic actions in light of the coming tsunami of stronger economic rivals:
- We cannot hope to compete in the future economic landscape if we do not find a way to better educate our children for this new reality. The United States consistently ranks in the bottom half of worldwide student testing and education. This will not make for a strong economy if our workforce is outsmarted by other countries that also have the advantage of numbers on their side.
- We cannot hamstring our own economy with Obama's cap and trade policy while the rest of the world, including the bigger and bigger energy users of China and India do not agree to stringent and trackable carbon emissions programs. If the United States goes it alone in this area, our economy will suffer at the hands of these economies that do not, resulting in lost jobs, lost industries, and lost economic strength since any carbon savings we incur will be overwhelmed by these new economic powers.
- We cannot continue to police the world, draining our economy through our military budget. Better to focus on getting our own economic house in order rather than deploying troops around the world to protect against enemies that do not exist anymore, enemies that cannot do any direct harm to us, or enemies that are better handled by other countries or the United Nations. We need to bring home our 54,000 or so troops from Germany since the Iron Curtain no longer exists, we need to bring home the 90,000 or so troops from Iraq as Obama the campaigner promised to do, we need to bring home our 50,000 or so troops from Japan since Japan is not going to hit Pearl harbor again and 50,000 troops are useless in the face of 2,000,000 Chinese troops in the neighborhood, and we need to bring home our 28,000 or so troops from South Korea and let them handle their own security, their economy is strong enough to handle it. Our focus on defense needs to be much more narrow and much more focused on those that could actually harm us and we need to bank the savings and strengthen those areas that will enable is to better compete economically.
- We need to finally develop and deploy a sane national energy program that makes us as self sufficient as possible, given that the hungrier economies of India and China will start to compete with us for raw energy sources. The less we spend on energy, as with defense, the better and stronger our economy will be against the onslaught of the growing economic powers in the world.
- We need to start getting our national debt and government spending problem under control now. The more capital and investment dollars that can be funneled into American businesses, the better off we can compete with China and India and the rest of the world. If all of our available capital is going to the government, where it is used on wasteful, inefficient government programs or used to pay the interest our national debt, the less flexible and competitive American businesses will be and less economic health our citizens will enjoy.
Bottom line, what is needed is a long term strategic plan for dealing with the new world order in the areas of national defense and economic strength. Do we think that the American political class is ready for such a comprehensive analytical and strategic task? Consider what our politicians have been working on over the past year or so:
- A Congresswoman and her staff worked on legislation that would regulate the sound volume of television commercials.
- A Congressman and his staff worked on legislation that would ban the airing of ED commercials on television.
- A Congressman and his staff worked on legislation that would provide a tax break for pet owners who might have to give up their pets in these hard economic times.
- The entire U.S. Congress and the entire Federal financial regulatory network was completely blind sided by the biggest economic malaise since the Great Depression, not realizing what was coming until it hit them in the face.
- Politicians in both houses of Congress worked on a bill to regulate how Division One college football teams decide a national championship.
- The current New Mexico governor is working on whether or not to pardon Billy The Kid, who died over a hundred years ago.
- A Georgia Congressman, at a Congressional hearing, worried in public on whether the island of Guam could tip over in the ocean.
- At least two sitting Congress people are likely to shortly face ethics charges and potential trials in the House Of Representatives for numerous financial and ethics offenses.
- Nancy Pelosi, Speaker of the House, has publicly stated the insane concept that unemployment is the best way to create jobs.
As you can see, we have not elected the most forward thinking, strategic brains in the country. They are so entwined in the daily political infighting and just absolutely trivial matters that time is slipping away while other countries are quickly growing their economies to compete with us, our companies and our citizens.
If long term, strategic thinkers were running this country, they would not be working on the above trivial matters but instead would be focused on the following:
Step 1 - start reducing the size of the Federal government by 10% a year for five years to get our national debt and spending under control and to leave more capital in the private market for investment against other economies.
Step 2 - find a way to finally make us more energy self sufficient and to bring other nations into a world wide, trackable process that reduces carbon emissions equally, not allowing any economy to gain an economic edge at the expense of others and the environment.
Step 3 - develop a ground up approach to overhaul, improve, and revolutionize American public education processes to prepare our kids for competition in the new economic world order.
Step 4 - bring home most, if not all, of our foreign deployed forces to begin the downsizing of our military budget in order to get our national debt under control and to provide capital to grow our private sector of the U.S. economy.
Step 5 - end the Cuban embargo immediately. After fifty years, most sane people would conclude it has not worked and ending the embargo would open up a new market for American businesses just ninety miles from our shores.
Step 6 - the most important step, institute term limit for all politicians. Given that none of these needed strategic steps have happened to make us better able to compete in the new economic reality and that most of the sitting politicians have been sitting in the same seats for decades while nothing happened, we cannot assume that all of a sudden they will do the right thing. We need to continually refresh those serving in Congress and the government with new people that are more fully aware of what is going on in the world and are not tied to old ways of thinking and spending.
We can succeed, we just need some visionary thinker and leaders to make it happen. India has its own problems, a large part of its population is still dirt poor, possibly providing social unrest problems unless they somehow can bring more people into their economic growth. The Chinese population will age quickly, as a result of their one child per family policy, putting strain on their economy in the coming years. All is not lost. In fact, if executed right, a long term strategic plan, as proposed above, could make the United States even stronger since new markets would open up in these growth economies. I guess the political class will get to this strategic plan as soon as the fix that pesky college football playoff system.
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