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The Indian tortoise and the Chinese hare

Kenneth RogoffKenneth Rogoff is Professor of Economics and Public Policy at Harvard University, and was formerly chief economist at the IMF.

by Kenneth Rogoff

"India everywhere" was the theme at this year's World Economic Forum. In the West, there is so much focus on China that India's achievements are often acknowledged only as an afterthought. As if to underscore the point that political stability must triumph in the long run, the Indians plastered Swiss buses with the banner: "India: The World's Fastest Growing Democracy."

The India media blitz was a huge success. In Davos, speaker after speaker touted the idea that even if China is ahead now, over the longer run, the race between Asia's two giants is a toss-up. For a few days at least, India's emergence as a superpower on par with China was taken as a fait accompli. But what is the reality in the race between economies with more than a billion people each?

On the surface, China has opened up quite a lead on India. Twenty-five years ago, at the start of the contemporary wave of globalization, national output in India and China was about the same. Now, by any measure, China is more than twice as rich.

But the real difference is not so much that successful Chinese are doing better than successful Indians. After all, the Indian elite are world-beaters, as Lakshmi Mittal's bold $22 billion bid for French steelmaker Arcelor shows. No, the real difference - whether we like to admit it or not - is that China's communist government has succeeded in globalising a much larger share of its population than India's democratic government has managed to do.

Not that China is exactly egalitarian. It is only along the coast, home to roughly one in three Chinese citizens, that most people can be said to have really joined the twenty-first century. Much of rural China is still miserable, with 150 million people effectively unemployed and health and education standards often befitting an earlier century.

But caste-bound India's record of exclusion is worse. Perhaps only one in five persons are integrated into the global economy. For every call center employee, there are many more people still eking out a subsistence living on the land. Whereas China probably has about 450 million people in its globalised economy, India has at most 200-250 million. It is this difference, more than anything else, that sets the two economies apart.

What can India do to close the gap? Its biggest shortcoming is its lack of roads, bridges, ports, and other infrastructure, where the contrast with China is just stunning. If your products can't get to the global economy, you cannot conquer it.

Over the past five years, China has multiplied its highway system five-fold. Its 50,000 kilometers of new roads are built to handle even large aircraft, which is more than one can say about some of the runways at India's shambolic airports. It is not just a matter of money - India's central bank is rolling in cash, which it has mainly invested in low-yield foreign treasury bills.

The real problem is that China's authoritarian system faces little opposition when it decides to bulldoze a shantytown that stands in the way of a new airport. India's government, by contrast, has neither the power nor the inclination to trample over poor people to make rich people richer.

Unfortunately, without infrastructure, the 800 million-plus Indians who have not yet "made it" don't have a chance. India will never be able to create enough jobs in services alone; it must be able to compete in low-end manufacturing areas as well. Without better infrastructure, the majority of India's citizens will remain frozen out of globalisation.

So, is the idea that India's economy could overtake China's hopeless romanticism? Not necessarily, if only because the areas where India excels, notably services, have far higher potential margins than manufacturing. Here, the Chinese, hampered by a vastly inferior legal system, will not be able to compete easily.

Western companies are far more inclined to trust Indian firms with sensitive financial information or patents than they are in the case of China. Foreign companies know that if they outsource any high-tech process to China, they might as well publish their blueprints on the Internet.

India also has a much better developed financial system than China, an advantage that will be increasingly important as the two countries develop. Command and control financing ("directed lending," as economists call it) works well when it comes to building bridges; it is a lot less effective when it comes to choosing what companies deserve to survive.

The challenge for the Indians, and, indeed, for other emerging markets like Brazil, Russia, and Mexico, is that they need to find ways to broaden the successful sectors of their economies without strangling them. If India is to ever catch up with China, it must globalise more of its citizens, through better provision of health, education and infrastructure. Only then will we truly start seeing "India everywhere."

Copyright: Project Syndicate, 2006.
www.project-syndicate.org
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More Bad News For US Economy

See this report from The Independent:

[extract]

Lucrative opportunities taken away on a political whim; the danger of being locked up by an over-mighty government agency; the brick wall of protectionism - the business community expects to do battle with all these things in an emerging market.

Yet this suddenly seems to be a description of doing business in that most developed of all markets, the United States of America.

...

Across the world, friends and free traders are concerned about the course set by the US. They say that while its motives are diverse - national security, energy supply concerns, the protection of investors - there is a single conclusion: it has become riskier, costlier and harder to do business with the US and, unless that changes, fewer people will want to.

Eye Of The Beholder

Hi again Gareth. I guess ideological bias, like beauty, is in the eye of the beholder. Indeed, all analysis of economic data is likely to be biased by the analyst according to their own (imperfect) understanding of economics. It is only natural that we would be more likely to agree with those who share a similar understanding.

I have read the Dan Denning essay Do Deficits Matter? and agree totally with his argument. It reinforces my view that the US and others are headed in the wrong direction. Deficit spending, either by nations or individuals, for purposes other than capital formation and building productive capacity is a long-term transfer of wealth from buyer to seller. Selling assets to fund recurring consumption is a recipe for economic ruin.

Manufacturing jobs in the USA are disappearing at an alarming rate. The State Of Working Illinois, from the University of Northern Illinois et al., provides some sobering statistics, no matter what your ideological bias.

Manufacturing jobs have fallen by 24.3% or 225,000 since 1990. While overall employment has risen slightly over the same period, new jobs pay less than the jobs that were lost. Positions in education, health services, leisure and hospitality pay a staggering 29.2% less than the manufacturing jobs they replaced.

Median household income in Illinois (adjusted for inflation) is the same as it was in 1989, having dropped 12.2% from the peak in 1999. This is the second sharpest decline among all 50 states, and larger than the 3.8% decline at the national level over the same period.

Real wages declining over the last six years, manufacturing capacity disappearing, debt expanding at an unprecedented rate, a negative savings rate, consumption way above production, total dependence on the savings of strangers... Some might be able to convince themselves that there is nothing to see here, but I'm not one of them.

Corporations like Enron fudged figures without a hint of mainstream exposure before they collapsed. If the MSM start doing warts and all analyses and report findings like those of The State Of Working Illinois, I might give them more respect. In my opinion, most current MSM reporting is little more than the regurgitation of the official pronouncements of born liars and thieves with a vested interest in keeping the punters ignorant and spending like there is no tomorrow. Of course, that is my ideological bias.

Fortune and UNI not MSM Michael?

Michael, generally speaking I would not have a problem with a University sponsored study; it is hardly in the same league as blog posted analysis. I’d like to see a similar comprehensive study on NSW if you are aware of any?

Do you not consider Fortune magazine part of the MSM? Bethany McLean was the first person to question the accuracy of Enron’s financial statements. Her article appeared in Fortune before Enron collapsed.

Interesting sidenote, I had a quick look at the forum on the Daily Reckoning yesterday. Posted a few points as well. It made me appreciate the relatively reasoned debate that exists on Webdiary. The DR forum is home to some serious nutjobs, some predicting the end of civilisation within the next couple of years.

Thanks Gareth

I wasn't aware of Bethany McLean's work. I don't remember reading any of those reports in the daily newspapers or other mass media before the Enron collapse. Was her work widely accepted before the collapse or were her views largely dismissed? I do remember that a lot of punters lost a lot of money when that ship went down.

WSJ and Enron collapse

Michael, I don't remember much about the reporting of Enron before and after it collapsed either. But I did find this interesting feature from New York Magazine. It's funny to read that the Wall Street Journal has tried to take a chunk of the credit for being the first to expose Enron.

Lazy analysis and distorted statistics

Michael Coleman, you’re right, conspiracy blog is the wrong description for this particular site, “alternative finance media with an ideological bias” would have been a better accusation (this is not a verdict, the site may have merit, I haven't read enough to conclude). Michael, I’m sure you make snap judgements on unfamiliar websites every day too. Any alternative media that suggests superiority to the “mainstream press” is using language common to that used by your average conspiracy blog. Personally I get very annoyed by sites that boost a particular view (political, economic etc) based on distorted analysis. I never watch Today Tonight for the same reason.

On the ideological bias, Dan Denning has clearly distorted the TIC data to support a negative view on the US dollar; my previous post outlines the proof. I have no idea where his bias originates. Perhaps Mr Denning has bought a large number of USD put options recently and would like to talk down the USD. Dan Denning has portrayed a regularly occurring seasonal effect as being a signal to exit the USD (“make for the exits”). This woeful analysis of some relatively ordinary economic data is why I suggest you be wary of sourcing economic analysis from blogs and alternative media. There are thousands of crap investor newsletters on the internet and only a handful of good ones. I have not read enough of Rude Awakening to form my own view of which category it falls into. However, if the bulk of economic analysis posted on Rude Awakening is anything like this piece from Mr Denning, I suggest you steer clear of this site altogether.

Maybe when Dan wrote his email on the TIC data, he fell into a similar trap as myself. Presenting lazy analysis that supports his view on the USD, by distorting the TIC data. The reason I suggest this is because I found this essay titled “Do deficits matter? How does government borrowing affect the long-term viability of an economy?”, also written by Dan Denning. I think it is a quality essay. Has it been posted on Rude Awakening?

Suspicion confirmed

Michael Coleman, forgive me for my hasty conclusion on your linked website, however subsequent reading of the site confirms my original suspicion. This quote from the website - “Spare yourself from becoming another mainstream press casualty” - says it all. I say Michael, spare yourself from becoming another blog conspiracy casualty.

I do not dispute the figures (I should have said analysis, not figures), you might have noticed that I too linked to the US Treasury website. The Rude Awakening website appears to be one of thousands that can be found on the web distorting statistics to suit their own ideology (both sides of the political spectrum do it).

A brief review of the stats reveals that the November number of 54 trillion (thanks for correcting me) is a spike that was repeated in previous years. The fall to 18 trillion is the same. I think you’ll find the Nov-Dec fall in 2004 was much greater in percentage terms. I suspect this is just a recurring seasonal effect, possibly related to the holiday period (that’s just my one minute theory).

Michael, have a read of the OECD report on the US economy I posted earlier in this topic, it is quality and impartial analysis of the US economy. Blogs and alternative media are fun to read from time to time, but I wouldn’t place much reliance on their analysis.

An inverted yield curve indicates that the market believes interest rates will fall in the future. Further implications require the consideration of numerous other economic indicators.

Gareth, thanks for your

Gareth, thanks for your concern that I might become "another blog conspiracy casualty". However, your description of The Daily Reckoning, The Rude Awakening, Marc Faber's The Gloom, Doom & Boom Report and the various writings of Dr Kurt Richebächer as "conspiracy blogs" cannot go unchallenged. Please, could you give me some examples of the conspiracy theory (or theories) these publications and authors have embraced?

You have decided that publications like these distort statistics "to suit their own ideology". Please tell me more about their ideology and the basis for that decision.

I suspect that you use these tactics as a lazy way to dismiss contrarian views without making any attempt to counter the arguments on their merits.

Another Sign Of Recession?

It appears that private investors are now a little shy of owning the long-term liability of a government mired in "the long war" and bankrupting itself. From The Rude Awakening:

[extract]

Net foreign purchases of long-term U.S. securities fell 38% from November to December. But that's not the most alarming number. Poke around in the data and you'll see that private foreign investors purchased 75% fewer government bonds and notes in December compared to November. In dollar terms, it was a decline of $38 billion, from $50.8 billion in private purchases in November to just $12.7 in December.
...
Foreigners are loaning money to the U.S. government for a much shorter period of time, cashing in on the inverted yield curve and wary of the big risks they see brewing in an economy that continues to consume more than it produces.

More conspiracy blogs

Michael Coleman, I have no idea what the-rude-awakening.com is, but I have to question their figures. The foreign holdings of US treasuries increased from 1.91 Billion USD to 2.18 in 2005 - see here.

Michael, I recommend that you place a greater reliance on analysis of economic reports from legitimate sources (OECD, BIS, Fed Reserve, Bloomberg, Fin Review etc), rather than conspiracy blogs.

Awake Yet?

Gareth, you say you have no idea what The Rude Awakening is and then you tell me it is a "conspiracy blog"! Please make up your mind.

BTW, the Treasury figures you quoted are trillions, not billions.

If you wish to dispute the data in my post, take it up with the Treasury International Capital System website of the US Treasury. The numbers referenced by Dan Denning in the article I quoted can be found here (scroll to the bottom). It took just a minute or two with google to find the source data from clues in the article I linked. Did you read it before passing judgement?

How about you tell us all what you think the inverted yield curve implies?

Michael Coleman...

 Michael Coleman "Righto, Jay, I've had a go at answering your argument. It's your turn again. Do you think monetary inflation doesn't matter?"

Of course I think it matters, never said it did not. I have often been reminded by a commentator here that I am a Milton Freidman accolate. A bit old fashioned and out of date I am told.

"Anyway, why would the Chinese want to significantly devalue the (near) trillion US dollars in currency reserves it holds?"

Well I think you answer your own question with this one. Ask yourself why the Chinese would like to see the good times end? Also why would individual Chinese investors not be putting money into the US? Where else for example should it go? Hong Kong maybe? Tax and question  free Europe perhaps?

"With no savings to fall back on and no real wages growth in the USA, debt-strapped consumers will have no choice but to cut back expenditure and that sounds like recession to me".

Well these things have been known to happen from time to time. Although not enjoyable a bit different from a depression. I myself have been through three in my memory perhaps more. Perhaps the question you should be asking yourself is who leads the world in and out of them. Than you could earn yourself a lot of money watching the signs. If you get three out of ten signs right somebody might call you a guru?

 "What's your take on the run-up in precious metal prices?

Well the gold price is always a sign inflation is on somebody's mind, but than again so is war. Oil is scarce at the moment and production is high (China, India etc) it cannot always be like that, life like an economy runs in cycles.

However your estimates on the US demise are still exasperating and you really have not proven anything. I remember a place called Fort Knox and before you show me figures to do with gold sales I also remember a movie called Goldfinger.

If you owned gold would you really tell anybody how much of it you had without pressure?

Never trust a bullion estimate!

Michael Coleman...

Michael Coleman, what I am suggesting is that your assumptions of the US and to a lesser extent Australia's economies crashing down due to a large trade deficit is an illusion.

As the article shows the Chinese currency will soon be re-valued upward. This will skinny the trade imbalance between it and the US, it will also be attempting shortly a more market orientated currency system along with raising imports.

Comparing the Chinese economy with the US at this point in time is like comparing apples to oranges. Trade surpluses and deficits are the most misread and confused things in world economics.

No Easy Answers

Jay, the article you linked to says:

China on Monday poured cold water on speculation that its bulging trade surplus could trigger a dramatic shift in currency policy, restating instead that the yuan is likely to keep rising only gradually.

Well, the yuan has been rising gradually since July (by about 2.8% against the USD) and the US deficit was a record last year. Seems to me, the article points to more of the same...

Anyway, why would the Chinese want to significantly devalue the (near) trillion US dollars in currency reserves it holds?

While it is true that a significant revaluation of the yuan would "skinny" the trade deficit, there is peril in this too. Downward price pressure in the debtor nations has been sustained by cheap Chinese imports. If the yuan revalues significantly, consumer prices will rise significantly too. With no savings to fall back on and no real wages growth in the USA, debt-strapped consumers will have no choice but to cut back expenditure and that sounds like recession to me.

With the banks and other lenders exposed by ridiculous real estate bubbles, a recession in the US may well set off a nasty financial shock all around the planet.

Righto, Jay, I've had a go at answering your argument. It's your turn again. Do you think monetary inflation doesn't matter? What's your take on the run-up in precious metal prices?

Michael Coleman

Michael Coleman I suggest you read this link (China Daily article).

Your Point?

Jay White, Thanks for the link. Are you are trying to show that there is no risk of inflation? I would prefer to read some properly argued theory and historical examples rather than some commentator's unsubstantiated opinion.

My turn now: I suggest this on why money supply matters.

Inflation?

Michael Coleman, re your points.

- The monthly trade deficit would be helped by a lower USD, like I mentioned before. Your point is valid, it is not a sustainable deficit, something will have to adjust. Exchange rates are the most obvious example.

- Consumer spending may account for 70% of the economy, I don’t think it accounts for 70% of debt though?

- I’m not sure what your concern is relating to money supply exceeding GDP?

- I don’t know why not reporting M3 is an issue, M2 is still reported? It’s not like the M3 numbers will become a state secret, you’ll just have to do a few sums now. Here's a link with some explanation.

- I think price increases in precious metals reflect a booming demand for resources in general. I think I see your point, though: are you predicting a global wave of hyper-inflation?

Global Problem

My comments about the US economy apply to the UK, Australia and others too. We are all debt junkies, trapped by the illusions of wealth derived from loose monetary policy pumping house price inflation. However, given the role that the USD play in global trade...

Global hyperinflation is a realistic possibility. Thanks to Alan Greenspan's response to the bursting of the Nasdaq bubble, the World is awash in US dollars. The other currencies have inflated supply to maintain competitive advantage, keeping the relative value of the currencies reasonably stable.

Gold, silver, oil and other commodities reflect the real rate of inflation of the global money supply, rather than the effect of unsatisfied demand, IMO.

Perhaps you could point to a currency, anywhere, where monetary inflation was not followed by price inflation. My understanding of history is that one follows the other as surely as night follows day.

As The Washington Post reports today:

The record amounts of dollars that are flowing into foreign hands to pay for imports are being invested in US stocks, bonds and other investments. Economists worry that if foreigners suddenly decide they want to hold fewer US assets, they could send the value of the dollar, stocks and bonds all plunging.

I agree with you; the USD needs to fall relative to other currencies for the US trade position to have any chance of improvement. However, I wonder why foreign investors would continue to buy USD assets, knowing that the dollar needs to fall? And what happens to highly endebted US consumers when the price of just about everything they consume rises?

Modern money looks like a confidence thing. Once the confidence is gone, so is the money.

US debt

This issue of US debt is a real favourite on Webdiary, however the correct facts and implications are often elusive. The US does have a big problem with its public debt but it in a much healthier state than many Western nations. Here’s a link that shows where the world stands on public debt. >

Highlights:
3rd          Japan                     170% of GDP

16th        India                       82% of GDP

31st        Germany               68% of GDP

34th        France                   67% of GDP

36th        USA                        65% of GDP

86th        China                     29% of GDP

100th      Australia                16% of GDP

Michael Coleman, I have a question for you. If the level of US private external debt is such a concern why hasn’t the US dollar collapsed? Are the currency markets wrong? The Americans actually would like a nice orderly decline in the USD (a collapse could hurt the US and global economy for a year or two). American exporters would love for the USD to decline against the Yen and Euro (the Yuan would be even better but the Chinese fix it buy buying US Treasury bonds/notes). Millions of Americans have borrowed money to buy property, so what if it has ultimately come from Japanese sitting money in a savings account earning 0.1% p.a.?

Wait For It

Hi Gareth. With the USA trade defecit at USD 65.7 Billion in December, and a budget mired in red ink, the rate of change in debt is a telling signal. As consumer spending accounts for 70% of the US economy, the debt is hardly funding increased productive capacity is it?

As for currency markets, monetary inflation is rampant throughout the world. The rate of increase in money supply (and debt) has outstripped GDP growth by many multiples since 2000. From March, the US Fed will no longer disclose M3 (aggregate money supply) data.

A question for you: Do you think the large increases in precious metal prices indicate confidence in the currencies?

US (and other) debt

Well, Gareth Eastwood, US debt is an obsession with most of the world's economists, not just on Webdiary. Your list, which you seem to intend to be a reason not to worry, suggests the reason why - Japan's debt levels have been a major contributor to their 17-year-and-counting depression, while France and Germany's debt levels combined with the ludicrous Stability Pact are major contributors to stagnation in Europe. The US being in that company is a cause for worry, not for complacency. The other shoe will drop - but no-one knows when, and in the meantime, people work out strategies for fast reaction when it comes - and those strategies will almost certainly mean that when it drops it will drop fast and hard.

US economy

David, you're one of the few willing to acknowledge there may be rich developed nations in far greater trouble than the US. I agree the US public debt is cause for some concern, but following on from your example, it is minor compared to the economic problems parts of Europe face. I am just trying to encourage a more nuanced view of the world economy, instead of the usual USA = Bad.

This is a link to an OECD report on the US economy, one concern raised is the potential for "a disorderly adjustment" to the "constellation of trade balances and currency values" (nice economist speak). I guess this is similar to the point I raised earlier regarding movements in the US dollar.

SHHHHH!

Gareth, don't go pointing that out, it ruins the whole "collapse of the USA imminent" theory we have been hearing for the last 50 years!

Funny thing is Ii read not too long ago a book called "the rise and Fall of the great Power". Great book, written in 1987, published in '88. When I say great, the history it goes through is fantastic. However, the last chapter is a prediction of the future. Unfortunately for the author, he concluded that the USSR would overtake the USA in economic terms (based largely on the debt, as well as scarce "accurate" information out of the USSR). Must have been kicking himself when the wall fell that year! (Having said that, I would strongly recommend this book for its economic history for the past 500 years.)

Bigger Picture

GDP figures, like any one piece of a jigsaw puzzle, do not give a true picture of economic status. With a negative savings rate, a Federal debt of 8,200 billion USD and total consumer debt many times that size, the USA lives off of the savings of foreigners, including those with much smaller per capita GDP.

Bill Bonner and Addison Wiggin, in Empire of Debt, write:

"Americans believe they can get rich by spending someone else’s money. They believe that foreign countries actually want to be invaded and taken over. They believe they can run up debt forever and that their debt-laden houses are as good as money in the bank.

"That is what makes the study of contemporary economics so entertaining. We sit at our telescopes and laugh like a divorce lawyer looking at photos of rich man in flagrante delicto, we know there is money to be made."

Dr. Kurt Richebacher, a respected Austrian economist, writes:

"The American idea that everything good comes from consumer spending is preposterous. And that is the key fallacy in America today.

"Because consumption has grown so far out of proportion to production, capitalist America relies on the generosity of communist China. Americans don’t even realize how ridiculous and absurd this is. It’s so absurd I can’t believe it. I think this is the worst sign that I could imagine."

C Parsons "China's and

C Parsons: "China's and India's economies are only "big" because they have massive populations".

Two interesting points often overlooked by those predicting the rapid demise of the US economy like their grandparents and their grandparents before, etc.

1. China and India are relatively new economies in our understood sense. The US like most western nations is a mature one. The buzz word for all serious investors is "growth". It stands to reason that if say a mature oak tree is measured against a young oak tree, the young tree will show the highest rate of "growth" measured over a period of time against the mature tree.

This however does not imply that the young tree will as a matter of course reach the heights of the already mature tree. There is still many a rocky road to navigate before that time arrives.

2. The reason for rapid expansion of both the Indian and Chinese economies is primarily due to one reason, freeing up the economy from excess Government intervention and ownership. Strangely the thing that many US doomsayers themselves wish to return too for their own mature western economies.

These people are often also the ones complaining that free trade and world trade is a failure for once very third world nations. Quiet a paradox I am sure you would agree? Add to that both South Korea and Mexico.

To the Victor the Spoils

Interesting how it is presented as a competitive race for a pot of gold, with a winner and a loser.  It will be intellectually interesting to see what happens when what used to be one of the world’s poorest countries becomes the richest.  However, what the world needs is for every person to be able to live without a gnawing fear – the fear of violence, and the fear of real hunger.  Dignity, self-actualisation, free speech are subsequent goals.  Right wing economists argue that this is best done by allowing individuals the power to become wealthy, and they drag up the rest of civilisation behind them.  Unfortunately, the wealthy do not really care whether they create their wealth or grab it from those who do not have the power to defend themselves.  To our credit, Australia looks after its average citizens better than the United States looks after even its own gunboat diplomats.

Perhaps the biggest barrier to growth, for India, China and the rest of the world, is corruption.  Not only the corruption of individuals, but of nations as well, who use trading tactics, and if that fails, gunboat diplomacy to gather wealth to themselves.  The AWB case for example, is called a scandal, as if anybody is surprised that we were funding nasty things such as people who blew up other people.  The real crime the AWB  has committed is that they have been outed, and now, like any good black operative, they need to take their suicide pill – preferably only the senior managers, leaving the monopoly in place.  Labour doesn’t seem to have realised that neither American wheat farmers nor Israelis can vote.  Most Australians, on the other hand, realise that John Howard is neither stupid nor incompetent (which he would have to be not to know what was going on under him),  that his real job is to manage whatever international fallout there is, and that Labour isn’t helping.

Down Mexico way.....

Kenneth Rogoff: "..... there is so much focus on China that India's achievements are often acknowledged only as an afterthought."

India's GDP is less than Mexico's and South Korea's according to the IMF list, and not much more than Australia's according to the World Bank list.

GDP in millions of US dollars;

  • People's Republic of China (mainland only) 1,653,686
  • Spain 1,041,338
  • Canada 993,443
  • South Korea 680,409
  • Mexico 675,254 
  • India 665,071

So, if you think India is being overlooked, what about South Korea and Mexico?

What will become of the US?

As the rise of the Asian economic giants continues what will become of the US? In the United States leading scientists, academic leaders, and business executives have warned that the “scientific and technical building blocks of the US economic leadership are eroding at a time when many other nations are gathering strength.” Many signals were cited, perhaps the two most striking being the volume of engineering graduates in the US and the cost to employ them, compared with countries like China and India. China graduates about 600,000 bachelor’s-level engineers per year, compared to 70,000 for the US, and it costs about one-fifth as much to employ an engineer in China. India graduates 350,000 engineers per year, and employs them for one-eleventh as much.

What will globalisation mean for income levels in the Western World? It is certainly going to be an interesting century. Are we watching the last years of the US Empire?

Mighty Luxembourg

John Pratt: "Are we watching the last years of the US Empire?"

Well, it's been predicted every year since 1776, so it cannot be long now.

Gross Domestic Product in millions of United States dollars.

  • United States 11,734,300
  • People's Republic of China (mainland only) 1,653,686

Per capita Gross Domestic Product in US dollars

1. Luxembourg 63,609
2. Norway 40,005
3. United States 39,496 .........
97. People's Republic of China (mainland only) 5,642 .....
125. India 3,080

China's and India's economies are only "big" because they have massive populations.

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