So we won't be the top any longer, but we'll still be enormously dominant. So? Competition drives innovation.
All the "America is doomed" folks act as if America is going to crumble to pieces simply because we are no longer the only gorilla in the room.
The rest of the World doesn't need that complication.
I'd personally be more concerned about China's economic power, but I suspect that there's a limit to how efficient China's economy can be whilst maintaining its totalitarian state.
Once you're the second, you can't easily dictate anything anymore. Just like having multiple buyers, the seller has more options to sell the product.
These benefits are, in essence, virtuous cycles that give the superpower a advantages on the world stage just by virtue of already being in first place. Think of it like compound interest, or a really big ball in Katamari Damacy, only for geopolitical power. That is, the US can arrange things in its favor to make it more powerful just because it's already quite powerful and no other country is.
As an example, the United States Dollar is the de-facto reserve currency for the rest of the world. That means that the US can purchase things without having to first go through (expensive) currency exchange, giving the US an economic advantage. The reserve currency status is also a major factor that also allows the US to borrow money pretty much at will.
Similar arguments can be made about cultural, military, diplomatic, and other power.
That means that countries aspiring to be the superpower have the deck stacked against them. So when, despite this, China overtakes the US, the US will have an awful lot of catching up to do. It's not fighting for food in the streets, but it would be a fairly serious blow to the US.
Expensive? The Bid/Ask spread for EUR-USD is (at the moment I write this) 1.4582-1.4584. Hedging your forex risk can be expensive, but exchange is not.
Japan tried to boost the economy with massive expenditures in it's infrastructure, to no avail. Compare that to China's approach of building high speed rail networks that get cancelled, and to build huge 'cathedrals in the desert' - cities that are overpriced by the government, who refuse to let the price to be dictated by the market (which is what would happen in a true capitalist system). The result is that most locals are priced out of the market. The reason that the cities are being built in the first place is to drive growth figures. Not having any oversight may result in some dramatic revelations about China's supposed growth in the coming years.
http://news.bbc.co.uk/2/hi/8691083.stm
http://www.bbc.co.uk/news/business-11748644
http://www.sbs.com.au/dateline/story/about/id/601007/n/China...
Related HN discussion:
http://news.ycombinator.com/item?id=2386584
EDIT: Added link
EDIT 2: Typos
China has four times the population of the US. They're already the world's second largest economy based on the development of about 350-400 million people in the eastern section of the country alone, and they still have another ~800 million to go spread through the rest of the country. While there are significant obstacles to further developing countries the size of China and India, they have untapped potential left that Japan didn't.
General comparisons to Japan aren't valid here.
That artificial growth comes from reporting GDP on building things that nobody uses (like Cities). Conversely, like a large private corporation which doesn't have to reveal costs in any general accounting rules kind of way, China has the ability to create a view of their economy which is 'untrue.'
So put another way, the author posits that in a market economy the creation of a new city would be done by actors who were themselves creating more economic output as a result of productivity gains from having city infrastructure. Thus economists see new building as a leading indicator of economic growth. However if you simply spend a billion dollars to build a high rise office tower without any tenants or even a prospect of leasing it out, the 'leading indicator' aspect of that data point is completely wrong. The building will sit there empty, generating no economic growth whatsoever. There are hints that China is manipulating its figures in just that way.
The bigger challenge for China is that in the eastern part of the country the standard of living is growing much more rapidly than it is for people living in the western half of the country. The last time that happened Mao Tse Tung used it to his advantage to overthrow the incumbent government.
America is clearly overreaching at the moment.
Any facts/figures and comparisons to elaborate on this statement? I can see some arguments for this, but at the same time, the technologies we have these days might give this "overreach" some scaling power, so the US might not actually be overreaching...
Additionally, the average Chinese person is beyond capitalistic. China is hyper-capitalist, if anything. And no other country needs to look after 1.3B people, so China is essentially the first experiment in government for a population of that size.
China's going to become the world's largest economy -- there's essentially no doubt about this. Americans need to get used to not being #1 anymore. I know it's hard to swallow. :)
The world is going to look very, very different in 10 years.
Yes, Chinese people are certainly extremely capitalistic - no doubt. However, there is some serious issues to be sorted out to allow China to continue to grow.
There is no oversight on their unelected government - who knows the level of corruption, groupthink, nepotism etc. that goes on. This is bound to be a big obstacle sooner or later. Democracy has many flaws, but one of it's main advantages is that when the ordinary citizen can see that the government is acting in a manner against the best interest of the people, then at least they have the option to correct that.
Secondly, there appears to be a major housing bubble underway. If history has anything to teach us, it's that the faster a bubble inflates, all the more rapid it's contraction. We will more than likely see a correction, perhaps a recession in China in the coming decade. Real estate cannot be continually be bought up by speculators in the hope that prices keep rising forever - and the culture in China is not to rent out your investment property (i.e. your second or third apartment you bought to speculate with)! This is clearly unsustainable. They are gambling that real estate values always rise, and this is clearly bubble territory.
"China's going to become the world's largest economy -- there's essentially no doubt about this."
I think it will also - but perhaps not as fast as you think. It could take decades. The GDP growth figures the Chinese government put are look suspicious, just to point out one problem. What you could see happening is China overtaking the US in the next few years - then a recession hits and the economy contracts rapidly. Or the US partially writes down it's massive debts, and the Chinese panic because they are holding a huge mountain of partially/wholly worthless US sovereign debt. This means the Chinese cannot continue using the interest from US debt to fund the construction of massive capital infrastructure projects - also leading to a recession. Maybe WWIII. Who knows. Predictions are fun.
"Americans need to get used to not being #1 anymore" Not yet they don't. Who knows what will happen. Btw, I'm not even American (or Chinese) so I'm not saying this in a defensive manner. :)
"The world is going to look very, very different in 10 years." - this a truism!
Kind of tongue-in-cheek - but that's a lesson I learned from playing Civilization. I know it's just a game, yadda yadda, but sometimes I do wonder how much of it translates into reality. E.g., if this was a game of Civ, China's domination would be pretty much ensured at this point: they have so many "cities" that their "production" output and "science" output will overtake anyone else's in short order.
In fact, that's how I prefer to play the game often: just build minimal defenses to make sure my cities are not conquered, and invest in growth as much as possible. Sooner or later, I'm the 800 kg gorilla of the whole Civ map.
From what I remember, the overhead of high city counts in IV can be prohibitively high. It makes more sense to scale vertically rather than horizontally. Unless, of course, you employ the State Property civic (apt!). Interestingly, China has been switching to the Free Market civic for the last couple of decades... More trade routes and more incentive to support corporations, but higher overhead for the huge city count. There's a reason why you go through revolution when you change civics.
The US benefited from such a scientific talent immigration trend after WWII. The European theoretical physics community is benefiting similarly from LHC and the short-sighted cancellation of SSC. Any area of research that requires massive, long-term, blue-sky funding will be dominated by governments willing and able to provide it, and will attract the best talent from all over the world.
The major problems China will face in this instance will be the language barrier and reticence of some scientists to work for a more authoritarian, censoring government. The former is easily solved, the latter is problematic but not insurmountable - even scientists have their price and plenty would convince themselves to work under such a regime in the exact same way Google did (change it for the better by 'engaging' it), especially when the alternative is a stagnant career and dead-end research due to lack of funding elsewhere.
This conceit that many in the US and West have that the quality of our science and research is innate and unimpeachable is both ignorant and complacent. Where there's a will there's a way, and China certainly has the will.
Technically this has already happened, as the EU has a larger combined GDP than the US.
It's also not too surprising. For it's land area, the US is very sparsely populated, and 350m people are not going to have the same economic purchasing power as 1000m people, assuming the latter group can catch up in terms of infrastructure and technology with the former group.
However this does present serious doubts about the irrational exuberance in the strength of our markets for long term. It is hard to gauge China and its intentions. I am not saying that US has moral supremacy over China, but that China seems to be doing now what US used to do, for its own stability sake, twenty years ago. It is preparing to be the economic behemoth, despite the troubles it face in real estate and regionally.
The next twenty years should be pretty interesting.
Edit: I wanted to add a reference to this paper out of the Pentagon from two Pentagon top level staffers who assert that we should reduce our military spending and reinvest it in our youth. A very prescient analysis of where United States is heading, in the world. I wanted to add it as its own HN submission, but was not sure if it would be well received. Here is the link to the pdf: http://www.wilsoncenter.org/events/docs/A%20National%20Strat...
Unless, of course, the content of this article is somehow going to influence your business plans or YC application or your Ruby or JavaScript code. (No, I didn't think so.)
Butterfly flaps wings
Adjust your business model
The U.S. is doomed
Are we counting the cities worth of empty condos in the Chinese GDP? How exactly did the IMF arrive at these numbers? Is there external confirmation of government stats?
There are definite signs that there's a bubble waiting to pop in China, just as it did in the US, so i view even analyses by the IMF with some skepticism if they're based on government reporting, given that the government of China has both the means and the incentive to present itself as a growing economic power.
How about we hold off on the sound and fury until 2016, mmkay?
See this discussion from yesterday -- "Petrodollar Warfare -- AKA the "Oil Currency Wars" (http://news.ycombinator.com/item?id=2477659)
Still, probably a good time to start learning the ol' Mandarin.
China? You GOT to be kidding! They are run by a one party dictatorship. They run essentially a centrally directed, command economy. They are still so poor that on average they have a tough time even getting enough rice for their people.
So, starting from where they are, they can get a fantastic rate of growth basically borrowing science, technology, and finance from America. BUT: Once they quit crawling, get up on all fours, and start walking, then they will face the fact that they have some serious problems: (1) Total suckage for a constitution. (2) Similarly for their political and legal systems and human rights, e.g., little things like freedom of the press. (3) Next to nothing in 'democratic traditions'. (4) A lot of filthy air and water. (5) A population with a quite old average age.
So, once they are standing, their people will want to do things about (1)-(5). As a country, they will struggle. The struggles may become violent. On "One fine day" (I know, Japan, not China), they will get (1)-(4) solved; solving (5) will be harder.
Then they will be about where America was in, say, 1950. As they move ahead, actually to do better than America they will have to do well with things that are new, with pushing the envelope, with making progress on new ground. Then they will begin to see the enormous advantages of political freedom, freedom to cut new ground in our research universities, free enterprise, freedom of the press, freedom in art, guarantees of freedom from an oppressive government, etc. They will still have the problem of a population with too old average age and a bad ratio of people to land and natural resources.
Net, bet on the economy in China continuing to grow rapidly for some years, but don't bet on China actually beating America in any significant sense this century.
