Friday, August 21, 2015

Can China Change? A Lot?

Why China will never be as rich as America
[...] The odds are against China ever becoming a rich nation by U.S., European, or Japanese standards. Since World War II, South Korea is the only large country to get rich for the first time. Once promising up-and-comers like Argentina and Thailand have fallen victim to the "middle-income trap," stuck in an economic halfway house between poverty and first-world wealth. China is a likely addition to that list, according to my AEI colleague Derek Scissors:

It would not be unusual if there were cities in China with income levels similar to, say, France. It would be highly unusual for China as a whole to reach French levels of income. … The single most likely result is that China will share the fate of many other economies and fall far short of being wealthy. [AEI]

That's why the Chinese Professor ad was actually pretty stupid. It imagined an American economy that eventually loses out to China's because Uncle Sam embraces big government. But it is actually China that is increasingly favoring state intervention over market reforms as the path to greater national prosperity. And it isn't working out so well for them. China needs to shrink the state sector if it is to have any chance of generating broad-based wealth. And if a more market-driven capitalism drives a new era of economic growth for China, it also means a China where there is a lot more economic freedom — and probably political freedom, too — than exists today. And that would be a great thing for global prosperity and peace — not something for economic populists to rage against.
To quote Ronald Reagan, "Never say never." If the state sector backs off enough to allow market-driven growth, and that resulted in more political and economic freedom, we could see very big changes in China indeed. Read the whole article for embedded links and more.


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