As Michael Beckley acknowledges in his reply to Mark Thirlwell, it is hard to say definitively whether America is declining economically relative to China, because it depends what you measure. On some measures it is, and on others it's not. So the next question is: which measures should we pay attention to? And that depends on why we are interested.
In the present debate, flowing from Michael's excellent essay in International Security, we are interested in what the economic trends mean for America's strategic and political power, particularly in relation to China. And we are interested in that primarily because of the implications of shifts in relative power for America's management of its relationship with China.
So we have three questions to answer before we can draw strategic policy conclusions from the economic data. First, which economic measures are most relevant to judgments about relative strategic and political power? Second, how far are these measures actually moving? And third, how far do the relevant measures have to move to make a difference to the way America frames its policies towards China?
Let's look at them briefly in turn.
If I read him right, the core of the Michael's argument is that the wealth of a country's citizens, measured as average per capita income, is more useful than the overall size of its economy, measured as GDP, as an index of the country's strategic power. Read More
Obviously, this is only right within limits. As Michael says, Luxembourg hardly ranks as a global power despite high per capita incomes, so overall size counts for something. Intuitively, the primary economic factor determining national power is the total resources that can be applied by the state for national purposes, and that would seem to depend much more on the size of the overall economy than the wealth of individual citizens.
Michael's response to this, again if I understand him correctly, is that per capita income is nonetheless a better index of national power because it correlates with two other factors which counterbalance the effects of sheer GDP size. First, higher per capita income countries have more advanced economies and can harness more advanced technology, therefore using their resources more efficiently, so they get more power for each dollar. But is this true? I'm not sure it is, at least in the military field with which I am most familiar. History suggests that large numbers of simple weapons can often beat smaller numbers of more expensive ones. Quantity has a quality all its own.
Second, I think Michael argues that high per capita income countries have an advantage in power because they can devote a higher share of their overall wealth to national purposes, since a lower proportion is needed for bare necessities.
Again, it is not clear how far this is true. The proportion of national wealth available for national purposes depends on many other factors apart from per capita income – including how much of the economy the government controls directly, and how willing the people are to surrender what they control to the government. It is not at all clear, for example, that the US Government commands a bigger share of America's wealth than the Chinese Government does of China's.
So while I agree that GDP is a very imperfect measure of the economic foundations of national power, I think it remains the best we've got.
How big a shift?
As Michael suggests, many people both exaggerate the scale of China's rise, and wrongly believe that America is declining. There are interesting questions about the long-term trajectory of the US economy, but it is simply wrong to say that the shift in relative size of GDP between the US and China is even partly the result of US decline. It is all down to China's growth.
Remarkable as that growth is, I agree with Michael that it is often exaggerated. China is unlikely to 'rule the world'. It has little chance to achieve the preponderant share of global GDP that America has previously enjoyed, partly because of inherent limits to its own trajectory – especially demographic – and partly because there are just too many other big players in the world with (actually or potentially) the combination of big population and high productivity required to generate a huge economy. China may be the biggest for a while, but it will be one of a crowd at the top.
Nonetheless, China is much bigger economically relative to the US than it was ten or twenty years ago, and much bigger relative to the US than any country has been for over a century. This is a very big shift. And if size of GDP is a correlate of power, it is a very big shift in relative power.
What does this mean?
Is this shift big enough to make a difference to the way America manages its relationship with China? To be more specific, does it mean that the US should rethink the widespread assumption that continued American strategic primacy is the only acceptable basis for the future relationship? To be even more specific, does it make sense for the US to try to impose its primacy in China, as China's power grows? Well that's a big question, but here are two quick points.
First, this question is not entirely answered by deciding who is stronger. What matters in framing the relationship between the US and China is not just how much power each has, but what they need to do with it.
There are three key asymmetries in the US-China relationship which all break China's way. China's objectives are focused in Asia, while America's are globally dispersed. The theatre of competition is on China's doorstep, but an ocean away from the US. And in the military sphere, to maintain primacy in Asia, America must maintain sea control, while to prevent that China need only achieve sea denial. Together these asymmetries mean that China does not have to become as strong as America for the balance of costs and risks of sustaining primacy in Asia to grow sharply for America.
Second, the answer does not just depend on what America can do, but on what it wants to do. We might argue about how far China's power has grown, but we cannot doubt that it has grown a great deal. It will therefore cost America a lot more to sustain primacy in future than it has in the past, against China's clear opposition. The big question for America is whether the costs are worth it. That of course depends on what the alternative is. If the only alternative is Chinese hegemony in Asia, maybe they are. But that is not the only alternative.
Photo by Flickr user Silly Little Man.