October 14, 2012
Colin Read, Everybody’s Business Press-Republican
The International Monetary Fund is alarmed at the tepid growth among the world’s developed nations. The IMF fears a possible second global recession if nations cannot get together to avert the worst.
The IMF also revised downward to 7.7 percent the annual growth of China’s economy. Recently, the U.S. revised downward our annualized second quarter growth to 1.3 percent.
In other words, China is growing six times faster than we are.
One can point to many reason. Some allow us to deflect attention from our own tepid growth. We can’t replicate some of the other reasons for their growth. We urbanized more than half a century ago, while a lot of urbanization and rural efficiency improvements remain for them.
China has adopted with patriotic zeal the same sentiment that fueled our growth in the 1950s and 1960s. China did not have our Sputnik moment, but instead suddenly realized that economic superpower status was within their reach.
The U.S. has been the undisputed sole global economic superpower for almost a century. We have not seen the end coming because the undisputed champion, the leader of a century-long economic race, fails to look back after a while.
We also focus on a distortionary personal measure of economic success. To individuals, the Gross Domestic Product per capita, or the median household income, is a more relevant measures of personal wealth. According to these measures, Americans remain far wealthier than our Chinese counterparts.
Nations measure wealth differently, though. Economic might comes from total GDP, not GDP per capita. Total GDP measures the ability of a nation to fund national defense and to dictate terms on international economic treaties. A nation’s GDP dictates how effective it can be in formal or informal trade embargoes and sanctions. When economies melt down, they seek out powerful economic benefactors to bail them out. Lately, nations the world over have turned to China as the nation with the deepest pockets.
In fact, the U.S. relies on China to the tune of about $1 trillion per year to bail us out. China uses its store of U.S. dollars from our vast trade deficit with them to buy the bonds that fund our budget deficit. These twin deficits go hand-in-hand. When a nation has vastly more favorable trade terms with other nations, it also has huge clout in the domestic economies and debt markets of its trading partners.
There was a time when the U.S. used its economic power to drive economies around the world. Because of our current economic turmoil and political gridlock, we have lost our economic potency. The date when we officially pass the economic superpower baton to China is a mere formality. Given our relative growth of and our relative GDP, China will become the world’s economic superpower in 2023, just over 10 years from now.
China will have superpower potency well before 2023. Their different economic and political system allows them to reallocate economic resources at will. We have much less flexibility.
Our nation was traumatized almost exactly 55 years ago today with the unrelenting beep-beep-beep of Sputnik orbiting above us. When we saw our mantle of technological and economic supremacy slip away, the challenge brought out the best in us. We built colleges of science, technology, engineering and mathematics and made national heroes of those who devoted their careers to our economic potency and advancement. Recently deceased Neil Armstrong, the first person to walk on the moon, was an aerospace engineer, test pilot and perhaps our last national hero for his intellect, ability and courage, and his pride in NASA, an institution that we once considered a national treasure.
Now, we worship entertainers rather than those who devote and sometimes risk their lives for innovation and the pursuit of knowledge. Our public-education system has become one for the indulging of the interests of the child and parent rather than the need to invest in a nation. If we are to reverse our fate, we must again make public education not about the kids or their parents, the administrators or the teachers union, but about our nation’s future.
While we throw up our hands at the national debate, we can assert ourselves locally. The community group Vision2Action is sponsoring an education public forum on Thursday at 7 p.m. at Clinton Community College’s Stafford Center, followed by a town hall studio and call-in show at our local Public Broadcasting Station a week later at 8 p.m. Join us and define our economic future.
We must snatch our economic future from the jaws of defeat by seizing this new Sputnik moment to reinvigorate and reinvest in science and technology. We must direct our education resources not toward the wants of the individual but the needs of a nation. If we fail to do so, let’s stop teaching French, German and Farsi in our schools and instead teach Mandarin Chinese. The choice is ours.
Colin Read is a contributor to Bloomberg.com and has published eight books with MacMillan Palgrave Press. He chairs the Department of Finance and Economics at SUNY Plattsburgh. Continue the discussion at www.pressrepublican.com/0216_read.