5 June 2009
China Rising ~ Quinn agrees with Durant; I concour
The United States began its long trek to becoming a worldwide economic powerhouse during the 19th Century, leading to domination of the 20th Century. The dominant power at the start of the 19th Century was the United Kingdom. Today, they have the 6th highest GDP, just ahead of Italy. In 1970, U.S. GDP was $1 trillion and has risen to $14 trillion today. China’s GDP in 1970 was $92 billion. Today, it is $4.2 trillion a 4,450% increase in 28 years. China has been growing their GDP at an 8% to 10% pace for over a decade. They now have the 3rd largest economy in the world, and will pass Japan as the 2nd largest economy on the planet within the next 5 years. Sometime between 2030 and 2050, China will overtake the United States as the largest economy in the world.
The tremendous growth is being driven by the migration of millions of people from farms to the cities. By 2007, 594 million Chinese lived in urban areas. The United Nations has forecast that China's population will have about an equal number of people staying in the rural and urban areas by 2015. In the long term, nearly 70% of the population will live in urban areas by 2035. According to Professor Lu Dadao, president of the Geographical Society of China (GSC), China’s urbanization took 22 years to increase to 39.1% from 17.9%. It took Britain 120 years, the U.S., 80 years, and Japan more than 30 years to accomplish this.
For a different view of US debt...
The ascendance of China does not necessarily mean that the United States will descend. The United Kingdom entered the 1800’s with a tremendous amount of public debt. Through economic growth, fewer military conflicts, and control of spending, they were able to reduce their debt from 250% of GDP to 50% of GDP by 1900. The current U.S. economic position appears to be more dire than that of the UK in 1800. With total debt exceeding 350% of GDP, a global empire with troops stationed in 120 countries, two ongoing wars, a National Debt that will reach $14 trillion in the next two years, $56 trillion of unfunded future liabilities, and a rapidly aging populace, the ability for rapid economic growth is nil. We’ve lived above our means for decades and now we’re broke.
I wrote about China in May 2007....
Since the start of the “China story” we often hear how it will all end badly in civil disorder or economic collapse, whereas, Jim Rogers, the commodity guru has argued that the next big correction in China will be a massive buying opportunity, for both commodities and Chinese equities.
Well then, what’s the real deal on China?
Perhaps it might be useful to consult an historian and I found a strong opinion was held by a great one, a man who was awarded the Pulitzer Prize for literature and the highest award granted by the United States government to civilians, the Presidential Medal of Freedom. (President Ford in 1977).
William James Durant (November 5, 1885–November 7, 1981) was an American philosopher, historian, and writer. He is best known for his authorship (and co-authorship with his wife Ariel Durant in the later volumes) of “The Story of Civilization”.
Will Durant received his doctorate in 1917 and worked as an instructor at Columbia University.
The Story of Philosophy was published in 1926 by Simon & Schuster and became a bestseller, giving the Durant’s the means to travel the world several times and allowing Will Durant to spend four decades writing the eleven volume opus “The Story of Civilization.”
This is what Durant wrote sometime in the 1920’s as he concluded his history of China and reflected on its future. (the emphasis is mine).
This nation, after three thousand years of grandeur and decay, of repeated deaths and resurrections exhibits today all the physical and mental vitality that we find in its most creative periods.
There are no people in the world more vigorous or more intelligent. No other people so adaptable to circumstance, so resistant to disease, so resilient after disaster and suffering, so trained by history to calm endurance and patient recovery. Imagination cannot describe the possibilities of a civilization mingling the physical, labor and mental resources of such a people with the technological equipment of modern industry. Very probably such wealth will be produced in China as even America has never known and once again, as so often in the past, China will lead the world in luxury and the art of life.
No victory of arms or tyranny of alien finance can long suppress a nation so rich in resources and vitality…… Within a century China will have absorbed and civilized its conquerors and will have learnt all the techniques of … industry..
Roads and communications will give her unity, economy and thrift will give her funds and a strong government will give her order and peace. Every chaos is a transition. In the end disorder cures and balances itself with dictatorship. Old obstacles are roughly cleared away and fresh growth is freed. Revolution, like death and style, is the removal of rubbish, the surgery of the superfluous; it comes only when there are many things ready to die. China has died many times before and many times she has been reborn.