A World Without a China

Americans have some odd ideas about the strength of the Chinese economy:

In the poll, only one in five Americans said that the U.S. economy is the world’s strongest — nearly half picked China instead. Looking forward, Americans are somewhat more optimistic about regaining primacy, but still only about one in three expect the U.S. economy to be the world’s strongest in 20 years. Nearly three-fifths of those surveyed said that increasing competition from lower-paid workers around the world will keep living standards for average Americans from growing as fast as they did in the past. Ruben Owen, a retired Boeing engineer in Seattle who responded to the survey, spoke for many when he said, “We’re still in a reasonably good place … but it’s going to get harder because other places are growing stronger.”
Note that China is not only poorer than the USA, it’s poorer than Ecuador. It’s about half as rich as Uruguay or Belarus. Trinidad has about triple the per capita GDP of China. I think it’s probably true that average living standards in America are no longer the highest in the world, but we’re being beat by the likes of Norway, Switzerland, and the Netherlands not by China. But who knows? Maybe “stronger” just means “growing really fast” in which case China is, in fact, growing really fast.
The larger point is that, as Jamelle Bouie observes, “the world isn’t zero-sum, at least when it comes to the global economy.”
Just think about the impact on the United States if, for no clear reason, everyone in China died tonight. Would that decline in low-wage competition boost American living standards? It’s difficult to see how. Lots of stuff Americans buy is made by Chinese people. If the Chinese people die, we won’t have that stuff. Maybe Americans could make it instead. But then whoever’s making that stuff would need to stop producing whatever it is they’re producing now and start making made-in-China stuff. Either way, it adds up to less stuff being produced. Less stuff = lower, not higher, living standards.
But aha! you say. Currently we have about 9.8 percent of the population unemployed. They’re not producing anything. Absent China, maybe those people would be mobilized and we’d equalize the quantity of production. And there’s something to that. It does seem to be a shame that 9.8 percent of the people in America who want a job producing something are currently producing nothing. And, indeed, it is a shame. But it’s not the existence of China that’s got them in their current state of non-production. It’s poor macroeconomic policy in the United States. We have the ability right now to mobilize many unemployed people and have them do something. We just need to spend money to pay them to do something. Doesn’t “the money have to come from somewhere?” Not really. Money is just made up by the government. If we need more money, the government can create more money. What “has to come from somewhere” is actual productive capacity. But the existence of China doesn’t reduce our capacity to produce. On the contrary, it increases the world’s productive capacity. But America’s political leadership has failed to fully mobilize our productive capacity, leaving more and more people adrift and fantasizing about the notion that somehow doing away with “competition” from foreign producers is the best way to reduce idleness.
The voters are confused about this, but the political leaders are the ones who fundamentally deserve the blame for the sorry current state of affairs.