Thursday, 27 January 2011

The size of the US economy

There has been much talk recently about the threat the US economy is under from the Chinese dragon. Much of this talk has been sensible and based on facts and figures, whilst much has been vitriolic and even racist in nature.

Therefore it is sometimes beneficial to retreat and look at the core assumptions. This figure in a recent Economist gave me pause for thought. It shows a map of the USA, with each state's GDP compared to that of an entire country. For instance, California's GDP lies between that of Italy and Brazil (with the usual caveats about exchange rates). Texas's GDP is only slightly less than that of Russia. It is an amazing and thought-provoking diagram.

According to the IMF (via Wikipedia...), China's GDP is 5,745,133 million dollars, compared to America's 14,624,184 and the combined EU's 16,106,896. California's GDP alone is nearly a third that of China's.

Of course, China's economy is currently growing at an exceptional rate whilst those of the EU and the US are largely static. China's success story has been amazing (as has, incidentally, Brazil's), but that does not mean that it will continue to grow at the same rate. China's structural instabilities will grow with its economy, and the Chinese leaders will need to perform deft management of the population to stop severe growing pains. 

America will remain the world's pre-eminent economy for at least a decade, possibly two. It has time to look into the factors that are making segments of its economy uncompetitive and fix those problems. But they do need to look and fix; complaining about the amazing rise of the Chinese dragon will not help them.

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