Remember how China’s economy was supposed to surpass the U.S.’ sometime in the next decade or so? Turns out it may already have happened.
The World Bank’s International Comparison Program takes account of international prices to give a more accurate measure of real output. The statisticians have just completed the exercise for 2011, and they found that China’s economy back then was 87 percent as big as the U.S.’ — not 47 percent, as output converted at market exchange rates would have you believe. Since 2011, China has grown much faster than the U.S. According to the new numbers, its economy will be the world’s biggest before 2014 is out, if it isn’t already.
In any event, it was only a question of time before China became the biggest economy. Not to pile on the bad news, but in due course India will surpass the U.S. as well: The new figures vault it from 10th place in the global ranking to third, ahead of Japan and Germany. By advanced-economy standards, China and India are fast-growing economies, and they have huge populations. That’s all you need to know: Demographics plus catch-up growth sooner or later ordain the outcome.
The new figures don’t mean that China is now rich. Its living standards won’t approach those in the U.S. for many decades yet — and the closer they get, the harder it will be for China to maintain its faster growth. While output in the aggregate rather than per-capita incomes is the main foundation of military strength and geopolitical power, technological supremacy counts for plenty, too, and in that regard, the U.S. is still far ahead.
Nonetheless, history will deem China’s surpassing of the U.S. economy a milestone. The map of the global economy is changing faster than many suppose. And with it, U.S. domination of the world could end sooner than expected, too. The need for global cooperation will no longer be a choice, or something the U.S. says to flatter its friends, but a simple statement of fact.
The sooner the U.S. and Europe, whose relative weight is diminishing even faster, get comfortable with this idea, the better. And here’s a small, easy step to start with: Reform appointments to global economic-policy institutions such as the International Monetary Fund and World Bank. It was already insulting that the U.S. and Europe appoint the heads of these bodies as though they own them, with a European running the IMF and an American running the World Bank by mutual agreement. The new map of global output makes this presumption of authority insupportable.
In the long span of history, the Chinese may see the new figures as heralding a return to normality: Their economy was the world’s biggest until 1890, when the U.S. outgrew it. For Americans and their friends in Europe, the new rankings are a moment for reflection. The West’s century-long economic pre-eminence, and the habits of thought and action that flowed from it, can no longer be taken for granted.