Fogel optmimstic on China and pessimistic on Europe

Robert Fogel of Chicago Univ (and 1993 Nobel winner) is an eternal China optimist. In this FP article he points some startling ideas on Chinese economy (HT Marginal Revolution)

Some forecasts:

  • China is going to be USD 123 trillion economy by 2040! This would be 3 times the economic output of the world economy
  • The per capita income would be around USD 85,000, double that os EU and much higher than Japan and India
  • China will contribute 40% of world GDP compared to US 14% and Europe just 5%  
  • Average Chinese urban dweller would be twice as well-off as the average Frenchman

Reasons:

  • Enormous investment in education
  • Rural sector is far more dynamic than is assumed. It acts as both – a catalyst for urban growth via migration and a productive rural industry as well
  • The most common allegation is Chinese data is flawed and overestimates growth. Fogel says actually the flawed data is understating growth! China has a large unorganised services sector that is growing very fast but does not report their data to govt. Then the typical problem of not including education, healthcare in GDP underestimates growth in US and in China as well
  • Chinese political system is also not understood. They are far more well-versed with economics and economic situation than is assumed. It may not be open democracy but discussions and debates  are there in upper levels.

    Then Chinese economists participate in annual meetings of China Economics Society and criticise govt policies. Fogel has participated in them. They even express their views in Chinese newspapers and are called by Finance Ministry to discuss their views.

  • Chinese consumerism is far more active. In big Chinese cities, per capital income and living standards would easily shift them into World Bank category of High Middle Income. Then govt is taking measures to increase domestic consumption

Interesting stuff.

Fogel is quite pessimistic on Europe. Their share in world economy would decline from 21% now to 5%  by 2040 Reasons??

  • Demographics – rapid ageing of population with a sharp decline in fertility…deadly combination
  • European culture – relaxed, lack of aspirations

Fogel says China also faces risks-  demography, inequality, fin system, etc. But teh policymakers are vigilant to these issues and are working at them.

In the end he dwells on economic history:

To the West, the notion of a world in which the center of global economic gravity lies in Asia may seem unimaginable. But it wouldn’t be the first time. As China scholars, who take a long view of history, often point out, China was the world’s largest economy for much of the last two millennia. (Chris Patten, the last British governor of Hong Kong, reckons China has been the globe’s top economy for 18 of the past 20 centuries.) While Europe was fumbling in the Dark Ages and fighting disastrous religious wars, China cultivated the highest standards of living in the world. Today, the notion of a rising China is, in Chinese eyes, merely a return to the status quo.

China dominated 18 of the past 20 centuries! This is remarkable.

Meanwhile Krugman says all is well in Europe.

2 Responses to “Fogel optmimstic on China and pessimistic on Europe”

  1. Fogel optmimstic on China and pessimistic on Europe « Mostly Economics | China Today Says:

    […] Continued here: Fogel optmimstic on China and pessimistic on Europe « Mostly Economics […]

  2. Fogel on China « Mostly Economics Says:

    […] on China By Amol Agrawal I had pointed to an article by Robert Fogel where he says why he is optimistic on China and pessimistic on Europe […]

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