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Page added on December 6, 2014
It’s official: America is now No. 2
Hang on to your hats, America.
And throw away that big, fat styrofoam finger while you’re about it.
There’s no easy way to say this, so I’ll just say it: We’re no longer No. 1. Today, we’re No. 2. Yes, it’s official. The Chinese economy just overtook the United States economy to become the largest in the world. For the first time since Ulysses S. Grant was president, America is not the leading economic power on the planet.
It just happened — and almost nobody noticed.
The International Monetary Fund recently released the latest numbers for the world economy. And when you measure national economic output in “real” terms of goods and services, China will this year produce $17.6 trillion — compared with $17.4 trillion for the U.S.A.
As recently as 2000, we produced nearly three times as much as the Chinese.
To put the numbers slightly differently, China now accounts for 16.5% of the global economy when measured in real purchasing-power terms, compared with 16.3% for the U.S.
This latest economic earthquake follows the development last year when China surpassed the U.S. for the first time in terms of global trade.
I reported on this looming development over two years ago, but the moment came sooner than I or anyone else had predicted. China’s recent decision to bring gross domestic product calculations in line with international standards has revealed activity that had previously gone uncounted.
These calculations are based on a well-established and widely used economic measure known as purchasing-power parity (or PPP), which measures the actual output as opposed to fluctuations in exchange rates. So a Starbucks venti Frappucino served in Beijing counts the same as a venti Frappucino served in Minneapolis, regardless of what happens to be going on among foreign-exchange traders.
Make no mistake. This is a geopolitical earthquake with a high reading on the Richter scale.
PPP is the real way of comparing economies. It is one reported by the IMF and was, for example, the one used by McKinsey & Co. consultants back in the 1990s when they undertook a study of economic productivity on behalf of the British government.
Yes, when you look at mere international exchange rates, the U.S. economy remains bigger than that of China, allegedly by almost 70%. But such measures, although they are widely followed, are largely meaningless. Does the U.S. economy really shrink if the dollar falls 10% on international currency markets? Does the recent plunge in the yen mean the Japanese economy is vanishing before our eyes?
Back in 2012, when I first reported on these figures, the IMF tried to challenge the importance of PPP. I was not surprised. It is not in anyone’s interest at the IMF that people in the Western world start focusing too much on the sheer extent of China’s power. But the PPP data come from the IMF, not from me. And it is noteworthy that when the IMF’s official World Economic Outlook compares countries by their share of world output, it does so using PPP.
Yes, all statistics are open to various quibbles. It is perfectly possible China’s latest numbers overstate output — or understate them. That may also be true of U.S. GDP figures. But the IMF data are the best we have.
Make no mistake: This is a geopolitical earthquake with a high reading on the Richter scale. Throughout history, political and military power have always depended on economic power. Britain was the workshop of the world before she ruled the waves. And it was Britain’s relative economic decline that preceded the collapse of her power. And it was a similar story with previous hegemonic powers such as France and Spain.
This will not change anything tomorrow or next week, but it will change almost everything in the longer term. We have lived in a world dominated by the U.S. since at least 1945 and, in many ways, since the late 19th century. And we have lived for 200 years — since the Battle of Waterloo in 1815 — in a world dominated by two reasonably democratic, constitutional countries in Great Britain and the U.S.A. For all their flaws, the two countries have been in the vanguard worldwide in terms of civil liberties, democratic processes and constitutional rights.
19 Comments on "It’s official: America is now No. 2"
Plantagenet on Sat, 6th Dec 2014 7:03 pm
Not only is China #1 in GDP—they are #1 in carbon emissions and pollution as well.
GregT on Sat, 6th Dec 2014 7:39 pm
Plant,
Go to your nearest big box American store, and you will see on the shelves the result of a good percentage of China’s carbon emissions and pollution. The same can be said for us in Canada as well. We have exported our jobs, and our pollution to China, in exchange for cheaper consumer ‘goods’.
Makati1 on Sat, 6th Dec 2014 9:00 pm
The US is still number one in pollution per capita. “From 1990 up to this point(2011), carbon emissions in China have gone from 2.2 tons per capita up to 6.8 tons. This is roughly equal to per capita emissions in Italy. From 2003, in just 8 years, China has doubled its total carbon emissions. During that same period, US per capita emissions have decreased from 19.7 tons to 16.9. While the US still has a commanding lead in the race for the worst, the trends are such that China will overtake the US by 2017.”
http://www.enn.com/pollution/article/43332
The article is dated 2011 and is not accurate, but who knows what the real numbers are?
Apneaman on Sat, 6th Dec 2014 9:06 pm
“Great Britain and the U.S.A. For all their flaws, the two countries have been in the vanguard worldwide in terms of civil liberties, democratic processes and constitutional rights.”
That would be past tense and it was mostly for the white middle class and it was mostly due to massive wealth from oil and oppression abroad. And a little short term reward for saving and increasing the western elites power and wealth in WWII. Remember when all us freedom defending westerners did NOT do anything to prevent the genocide in Rwanda because they had no natural resources we could exploit? Woe to those poor SOB’s who had oil or copper or anything else to exploit. They don’t call it the resource curse for nothing. Now all those same tactics of oppression and theft are being used on the grandchildren and great grand children of that “greatest generation” that made it possible back in the home countries. The causalities of limits to growth and greed; it starts on the periphery and works it’s way towards the center. Tent city tenants were first. Who’s next? You’ll know it’s close to collapse when they start silencing and/or disappearing their critics and the non-compilers. There are only a few “civil liberties” left to legislate away – checkmate.
Makati1 on Sat, 6th Dec 2014 11:06 pm
Very complete and accurate picture, Apneaman. Too bad most Americans will never read it or, if they did, would call you a liar and a ‘terrorist’. Russia is the last of the real resource gold mines and you can see the West willing to commit murder, genocide, rape, and self destruction to get their greedy hands on it. Addiction to power and wealth is strong in the upper 1/000th percent.
Apneaman on Sat, 6th Dec 2014 11:20 pm
Some know, many know things ain’t right, but not why and some are just morons who will make perfect candidates for some demagogue’s citizen army – American Brown Shirts.
The Collected Hate Speech Of The Fox Nation Community
http://www.newscorpse.com/ncWP/?page_id=13324
Apneaman on Sat, 6th Dec 2014 11:32 pm
More angry people in the streets all the time, in many different countries for many different reasons. All having to do with inequality and oppression. This is a different kind of BOOM.
Watch: NYPD uses military-grade sonic weapon on Eric Garner protesters
http://www.rawstory.com/rs/2014/12/watch-nypd-uses-military-grade-sonic-weapon-on-eric-garner-protesters/
HARM on Sun, 7th Dec 2014 1:00 am
“Too bad most Americans will never read it or, if they did, would call you a liar and a ‘terrorist’.”
I’m an American, I read it and don’t think Apneaman is a liar or terrorist. Does that count?
Makati1 on Sun, 7th Dec 2014 1:29 am
Harm, you are apparently one of the few rational, non-brainwashed Americans. We probably number less than a million of the population of ~315 million. Some of us had to move out of the Police State to see the real world, but now we are made fun of because we see that other places and peoples are actually better positioned for the future than the United Socialist States of America. (Or maybe that should be United Fascist States of America?) Either way, it is no longer the land of the free and the brave are now taking to the streets.
PrestonSturges on Sun, 7th Dec 2014 2:43 am
China is built on foreign food, foreign money, foreign energy, foreign raw materials, and foreign technology. What could go wrong?
GregT on Sun, 7th Dec 2014 5:16 am
China has been around for thousands of years longer than the West. So it’s kind of silly to say that China is built on foreign resources.
Davy on Sun, 7th Dec 2014 5:58 am
Let’s bash the US morning and crow the greatness of China and Russia. China is a gangster state both civil and ecological. China is a hollow dragon with vast industrial over capacity, ghost infrastructure, and cancer cities. Vast areas of China have been ecologically made sterile. The government and army are have and are engaged in repression and small scale genocide in the Tibet and the Muslim region of Xinjiang. Wealth inequality is off the chart. China wealthy are exporting wealth and their families as quick as they can out of China. I guess they realize the party can’t last.
I want to know why bigger is better. The paradox of the pole shift in the human ecosystem is good is bad and bad is good. Big economies are no longer the optimum. Smaller is better. Carrying capacity is the key here and China is at the bottom of the list with a few other Asia countries. China is buying up the third world for its own selfish interests. China is threatening its neighbors in unrealistic territorial and resource claims.
There are propaganda bitches on this board that crow China’s greatness and say “well you know China is no worse than Italy in carbon numbers per capita.” That statement is absurd. Do you think nature gives a rat’s ass about per capita? The sheer amount of carbon coming out of China is off the charts and for what? Cheap consumer shit and a vast urban building bubble to enrich the greedy wealthy of China. China’s farmland, water resources, and rural culture have been destroyed by these greedy rich Chinese.
China is the number one criminal country on earth considering the civil and ecological crimes past and present combined with the fact that the population is so large, growing, with increased consumption. China is the suicide pill we humans chose with market based capitalism gone amok. This is the whole worlds fault because this was a business decision by millions of businesses in many countries that contributed to this crime against nature.
There are those on this board that will bash the US and say nothing of their own county. That is propaganda puke. They will use an article like this to focus on the US solely saying nothing of China IMA which this article concerns. It always amazes me my brothers up north who take every chance they get to bash the US and praise the China and Russia. What are you boys going to do in the North when SHTF you have to live with the US? Good luck guys because you are going to be miserable.
OK, to keep this balanced. The US is a hollow power with a culture and economy in decline. The US is at the top of the list for meddling in other people’s business and claiming moral exceptionalism. The US has done huge ecological damage over the years and still is. The US is many things. That is what this site and many others are concern with making these thing known constantly and methodically. That is some serious hatred and mental illness. Why don’t you propaganda bitches get a life and realize we are all in this together. You need to realize when you are throwing stones you are acting out that moral exceptionalism I doubt you can live up to. You are doing the same thing the US does. Please get a life and grow up.
GregT on Sun, 7th Dec 2014 6:23 am
Davy,
20 years ago in BC, we still had local community owned retail stores. Today, most are American owned big box stores with 90% (at least) of the products coming from China. The Chinese industrial ‘revolution’ was mainly a result of American multi nationals off shoring labour, and giving technologies and infrastructure to the Chinese.
To keep things balanced, as you say, the Chinese have run with it, and now have the infrastructure, technology, and highly skilled workforce to produce many of these products as well as, if not better than, we can in the west.
If for one second that you believe that I again, am siding with the ‘enemy’, think again. I saw this coming a very long time ago. What we have allowed these multinationals to do is nothing short of criminal. They have undermined the very root of our economies for the benefit of a few, at the expense of our entire societies. The only thing that we got in return was more consumer crap to fill our landfills with.
Davy on Sun, 7th Dec 2014 6:30 am
Boys, cow about this. This is the economy China has built on!
http://www.zerohedge.com/news/2014-12-06/citi-faces-270-million-loss-panic-over-chinese-port-commodity-fraud
Davy on Sun, 7th Dec 2014 6:42 am
No Greg, you are American critical with the US your neighbor a stone throw away so you have justification. You will have to live with a failed US state. You have contributed much to my understanding of the important fair and balance criticism of the US. There is significant under the surface deceit going on in the US leadership. You do good research in this regards.
You are top heavy in this criticism but from time to time mention Canada’s complicity. You are not impressed with China. I find your Russian support excessive but to be fair it is like my support of the US. Russia is in the cross hairs at the moment of western MSM and deserves support. I am top heavy on my obsessions with defending the US with the onslaught that propagandist on this board engage in. Fair, balanced, and research is one thing and brain farting criticism is another.
On the big box stores issue you mention. This is very true. Yet I always say this in this regard “China could have just said no.” China is a communist country with a capitalistic economy. Their government chose enrichment of the wealthy at the expense of the population and the environment. China’s leadership has the power to say no like no other great power.
Makati1 on Sun, 7th Dec 2014 7:32 am
China has every right to attain, or try to, the same levels as any other country, including the us. Americans got most of their tech from Germany after WW2. The whole space/rocket system is German built. Most of it’s science and math came from Europe and the Middle East. Even it’s language and alphabet are not native American.
The US advantage was vast mineral wealth and land, pillaged from the genocide of it’s original owners. The US was based on killing right from the start.
No real American culture other than that pieced together from European origins. No heritage. No history. No real identity. A Chinese has all of those and can identify with them for a hundred generations. Not so Most Americans who have less than 3-4 generations in the ‘New World’. I’m an “old timer” and I only have 14 generations. I hope the world stands long enough for Asia to rise and the US to be brought to their level for a while so Americans can see how the rest of the world lives. It will be an education.
J-Gav on Sun, 7th Dec 2014 1:27 pm
Apnea and Harm: I fear the ‘boom’ you speak of is well underway, and not only in North America (oh, and let’s not forget the heroic efforts of some Canadian and U.S. indigenous peoples to prevent the environmental rape which has been prepared for them.) Let’s support courage wherever it crops up, eh?
MKohnen on Sun, 7th Dec 2014 6:51 pm
The fact that China will overtake the US is as obvious as the fact that the US overtook Canada. I say obvious, because, by population, the US is 10X bigger than Canada. Since China is almost 4X bigger by population, of course it will surpass the US. I know one could say that there are other countries that exceed the US population and they haven’t overtaken the US GDP. But are they coherent countries such as the US or China, or extremely fragmented countries like Indonesia?
To me, China surpassing the US isn’t really something to be celebrated. It would be nice if China continued to exert its influence peaceably, as it has managed to do – relatively – so far. The biggest criticism I have of the US is its militaristic approach to all world problems. In fact, if you look at the “war on drugs”, the US is even at war with itself. There are more American POW’s in the US than there ever has been in any country in the rest of the world.
As for how China runs its country and economy, though, I’m really not sure I’m looking forward to it having SuperPower control over the world. Nor, for that matter, Russia. My personal wish is that Canada and the US can connect with their social democratic roots and help to shape the up-coming multi-polar world into one where individual rights mean something and the environment is tantamount.
Here … you want a puff?
Chubasco on Mon, 8th Dec 2014 5:36 pm
@MKohnen
I think it’s time we brought this one back for another tour…
http://sorrycomics.blogspot.com/2009/10/hubberts-peak.html
Desert