China

I watched the opening ceremony to the Olympics over the weekend, and I have been favorably impressed.

I have actually been quite interested in events in China for a while now, and have followed their progress over the last few years more closely than that of any country other than the United States.

There is a reason for this.

Assume that China’s economy continues to grow to the point that its per-capita wealth (its standard of living – according to one measure) is equal to that of the United States. Currently, China has between 4 and 5 times the population of the United States. This means that China would then have 4 or 5 times the economic power of the United States.

What would it be like to live in a country that, on the world stage, would be a bit player – a country that had so little economic power that it could be conveniently ignored?

If China were to become that powerful, then it would effectively control the world economy. Businesses would learn to focus their attention on satisfying the Chinsese cutomers – because that is where the money is. Americans would have to buy whatever the Chinese bought – because the Chinese would determine what is available to sell.

There are a couple of areas in which we can see this type of dynamic at work. One of which is in the manufacture of text books for public schools.

California and Texas have a policy of purchasing a common textbook across the whole state. The size of their purchase gives them economic power, which gives them the ability to dictate terms to potential suppliers. If they do not like the deal that a particular customer is offering, then they take their business elsewhere. It makes good economic sense for the state of Texas to do this. They can negotiate a far better price for text books than they could as several small and independent districts.

In Texas, some factions have realized that this economic power also comes with a power to indoctrinate. They want to dictate what children are taught in the public schools – particularly in the field of biology (creationism), but also in other classes such as history, civics, and social science. They aim to win seats in government where they judge books, in part, on whether they have the ‘right content’.

The result is that these factions ultimately end up having the power to determine what text books are available across the whole country. Manufacturers who are aiming to capture the Texas market write their text book so as to win favor in the face of their political and economic biases. When the people of Massachusetts and Oregon go to buy textbooks, they find that the books available have been written to meet the Texas standards.

Currently, in the world economy, America plays the role of Texas. However, if things continue going the way they have been, we can expect a day when China plays the role of Texas in the world economy, and the United States plays the role of New York or Pennsylvania . . . powerful, but not dominant.

Another area where we see this effect is in retail and manufacturing. Manufacturers today know that if they want to sell product, they need to get that product onto the shelves at Wal-Mart. In many cases, if Wal-Mart shuts them out, then they have an option of either accepting their small stature as a local company, or go out of business entirely.

Wal-Mart knows this, too. So, Wal-Mart goes to potential suppliers and dictates what the company must do in order to get their product on Wal-Mart shelves. Everything that a manufacturer does – from the size and shape of the package to how it handles employee relationships – is dictated by Wal-Mart, to the degree that Wal-Mart chooses to do so.

When Wal-Mart talks about how it is rolling back prices, sometimes what they are talking about is their success at getting some manufacturer to lay-off or cut benefits to employees so that they can supply the same product to Wal-Mart at a lower price.

Every other company that the manufacturer sells to, then, has no option but to purchase the product that has been designed to meet the Wal-Mart standards. Once the manufacturer has tooled its manufacturing center to meet Wal-Mart’s standards, there is often little reason to build a second system that meets different standards.

So, we can expect that as the Chinese economy grows – assuming that its society does not implode, that we might find ourselves where the world economy is geared to meet Chinese tastes. Even our own businesses, in such a world, would be geared to please the Chinese market, because American businesses will recognize that there is far more money to be had manufacturing things for sale in China, then there would be in manufacturing things for sale in the United States.

Is this frightening?

It should not be. For decades now, the world has lived in the shadow of the United States. If it is so horrible to live in a world where one is not in the country that is at the center of the economic universe, then 96 percent of the people are living a horrible existence – including people in countries like Belgium and New Zealand – countries whose economies are far too weak to dictate anything on the universal economic stage.

Ultimately, we might find ourselves in a world where the United States controls about 4% of the world economy, uses 4% of the world’s energy, and has 4% of the world’s military power under its control. All of this corresponding to the fact that we have 4% of the world’s population.

If (when) that day comes, how would we want the economic (and military) powerhouses of the world to treat us? What rules and principles are we going to want them to adopt towards smaller and economically and militarily weaker countries?

Whatever the answer to that question is, that is how we should start treating other countries today. Those are the standards that we should adopt now so that, if (when) we are no longer the most economically and militarily powerful country on the planet, we are living with economic and military powerhouses that have internalized the principles that we have helped to teach.

This is, in fact, the most frightening prospect. It is that other countries will pass us in economic and political power, and use that power in pretty much the same way we have used it – particularly in the last 8 years.

It may be wise for America to pay attention to setting a standard for how larger overall economies treat smaller overall economies. It will not be that America is impoverished, with lower standards of living than China. It is only that China, even with half of the standard of living as the United States, will still have over twice the overall economic (and military) power as America.