China Will Get Old Before It Gets Rich

Sometimes we should try to put our problems into perspective. As we feel threatened by the ascendancy China we focus on our financial problems, primarily our debt. It is hard to overstate the dangers of a continuing rising level of debt but the United States is not doomed. At the end of World War Two the United States was producing 60% of the world's GDP largely because few other countries were not damaged or destroyed by the war. In 1950 China bottomed out, producing just 5.2% of world GDP. As Europe and Asia recovered the United States share of world GDP logically declined. Within the last decade the US has seen its manufacturing base erode precipitously. When it is pointed out that real wages remained flat through the Bush years that statement is on its face true. The fact that for some 35 years we reveled in economic folly prior to Mr. Bush is usually omitted. The 60's and the 70's saw the rise of Japan and for the first time in any living American's memory the country seemed to be threatened but the 90's saw the decline of Japan.

If indeed China can maintain its annual 7% growth rate it is game over for the US. While China has not gotten itself involved in the inter-generational Ponzi schemes that are Social Security, Medicare, and defined benefits public pensions it too has problems of its own making Beijing’s one-child policy, introduced in 1979, was largely effective—though it had the abhorrent side effect of encouraging a disdain for female infants, a prejudice that has led to abortion, neglect, abandonment, and even infanticide. Applying mainly to urban couples of Han descent, the policy reduced population growth in the country of 1.3 billion by as much as 300 million people. There is price to pay for this radical social engineering. By 2015 there will be more older than younger Chinese workers. Males outnumber females 120 to 100. Roughly 30 million Chinese men will not be able to find wives. Within a generation the average Chinese worker will be older than the average American worker. As everyone knows the Chinese are the largest holders of US debt but Japan is the second largest. Japan had its "lost decade" owing to an aging population but the Japanese got rich before they got old. The Chinese will probably get old before it gets rich.