Skip to comments.Why We're No Longer Number One
Posted on 05/06/2014 1:40:14 AM PDT by Kaslin
Last week World Bank economists predicted that China would soon displace the United States as the world's largest economy. The fact that this one-time economic basket case is now positioned to surpass the US is one more sign of the damage done to American prosperity by welfare, warfare, corporatism, and fiat money.
Some commentators have predicted that China's reign as the world's largest economy would not last long. This may be true. While China has made great strides since adopting free-market reforms in the 1970s, China is still run by an authoritarian government whose economic policies distort the market in order to benefit state-favored industries. These state-favored businesses are often controlled by politically-powerful individuals.
What many of these commentators fail to notice is that the American government pursues many of the same flawed policies as the Chinese. For example, because of the increase in regulations, subsidies, and bailouts, many American businesses are putting more resources into manipulating the political process than producing goods and services desired by consumers. Many big businesses even lobby Congress and the federal bureaucracy for new regulations on their industries. They do this because big business can more easily absorb the costs of complying with the new regulations that force their smaller competitors out of business.
China is regularly criticized by American protectionists for subsidizing its export industries. However, the US government does the same thing via programs such as the Export-Import Bank. China is also criticized for manipulating the value of its currency to make its exports more attractive to foreign consumers. This may well be true, but China is hardly unique in this respect. Throughout its history, the Federal Reserve has manipulated both the domestic and international economy, often working in partnership with foreign central banks.
The Federal Reserve's inflationary policies benefit big banks, politically-connected businesses, and big-spending politicians at the expense of the American people. Anyone interested in helping improve the American people's economic situation should focus on changing America's monetary policy, not China's.
Ironically, many of the same politicians who denounce China's monetary policy benefit from Chinese purchases of America's debt. If China stopped making large purchases of US debt, the Federal Reserve would be forced to monetize even more debt, thus risking hyperinflation. So the best thing Congress could do to make it more difficult for China to manipulate the global economy is cut federal spending.
One advantage China has over the US is that the Chinese government does not waste money on a hyper-interventionist foreign policy. The United States government spent approximately $752 billion on the military in fiscal year 2013. In contrast, China spent approximately $188 billion. While China may be increasing its military spending, it has a long way to go to catch up to the United States.
It is difficult to see how the American people, other than those who run or work for the military-industrial complex, benefit from this spending. Military spending, like all government spending, hampers private sector growth by taking resources away from investors, entrepreneurs, and consumers while contributing significantly to the national debt. In contrast, a return to the policy of peace and free trade would allow those resources to be used by entrepreneurs to create new businesses and new jobs.
News that China is soon to surpass the United States as the largest economy in the world is a stark reminder of how the American people are harmed by the welfare-warfare state, crony capitalism, and fiat currency. The only way to avoid continuing collapse is to finally reject an interventionist foreign policy, stop bailing out and subsidizing politically powerful industries, and restore a free market in money.
I think America lost it's way with the (stolen) election of JFK. Reagan did all he could to turn things around, but it was not enough.
I put the blame on the parasites in DC. Our government's economic policies of wanton spending are letting the chickens come back to roost.
The days of the blank check, and bottomless credit card will end soon. There are going to be a lot of liberal entitlement slugs who are going to be some kind of angry.
Just as a general comment here, we definitively became NUMBER TWO when Obama was elected.
The flip side of this is that China's population is at least four times larger than ours, so in an age of global commerce and modern telecommunications it's really only a matter of when -- not if -- they supplant the U.S. as the world's largest economy.
As zer0 IS a #2. He wants all to be like him.
Are you still killing your unborn?
This is an excellent summary of the policies that are killing us. The only way to change this is to outlaw career politicians who depend on special interests to get re-elected.
Mr. Paul does an excellent job of defining the problem but only We the People can solve it:
On a per capita GDP basis, US is #13 @ $52,800 while China is #120 @ $9,800. But China is improving quickly.
Looking at CIA Factbook data, the nations with high fertility rates tend to be the poor nations.
The stats from recent decades show that as a nation lowers its fertility rate, wealth increases and poverty decreases. Healthcare and lifespan increase. Educational rates, including females, increase.
You got it, also have you noticed that hardly anyone in the world respects the US anymore, thanks to that arrogant pos occupant of 1600 Pennsylvania Ave?
Really Ron? You're not known as the Crazy Uncle for nothin'...
It is hard to respect a country that permits its government to dissemble, equivocate, evade, lie and scheme in its highest offices.
A nation can spend money on guns or butter, but spending on both leads to inflation and economic decline.
So, if you want to expand the economy, the govt can cut taxes, raise spending, and have a war.
But, if you do this, and the economy doesn't expand, and actually recedes(like under GW Bush and the GOP), you are in deep doo doo, like we are.
So we should kowtow conically AND militarily. I want out of this union. If you are a “conservative” then we are f-ed.
Agree about the population aspect, but do not agree when considering the pace that this took place. This should under normal circumstances be taking decades rather than years. And for that fact, our government is complicit.
The last time there was a new No. 1 world economy change, U. S. Grant was our president. Believe me this fact will added to the legacy of the present sorry pos potus.
Whatever that may be or not be, we still have the looming large problem of the boomers retiring and govt spending on SS and Medicare/Medicaid.
So if you look at the Big 3, what or how much are you going to cut? SS, Medicare/Medicaid, or Defense?
So I don't get SS COLAs anymore, and my Medicare copays and maximum out of pocket costs are rising. Who knows what will happen to those in the future.