In terms of purchasing power, China now has the largest economy on the entire planet, but that is not the only area where China has surpassed the United States. China also accounts for more total global trade than the U. S. does, China consumes more energy than the U. S. does, and China now manufactures more goods than the U. S. does. In other words, the era of American economic dominance is rapidly ending. Global economic power is making a dramatic shift to the east, and that is going to have huge implications for our future. We already owe the Chinese well over a trillion dollars, and as our economic infrastructure crumbles we are feverishly borrowing even more money in a desperate attempt to prop up our falling standard of living. We can’t seem to match the work ethic, inventiveness and determination of China and other Asian nations and it is showing. If we continue down this path, what will the future look like for future generations of Americans?
In terms of raw GDP, the U. S. is still number one, at least for now. But according to the IMF, China is now the number one economy on the entire planet in terms of purchasing power…
The simple logic is that prices aren’t the same in each country: A shirt will cost you less in Shanghai than San Francisco, so it’s not entirely reasonable to compare countries without taking this into account. Though a typical person in China earns a lot less than the typical person in the US, simply converting a Chinese salary into dollars underestimates how much purchasing power that individual, and therefore that country, might have. The Economist’s Big Mac Index is a great example of these disparities.
So the IMF measures both GDP in market exchange terms, and in terms of purchasing power. On the purchasing power basis, China is overtaking the US right about now and becoming the world’s biggest economy.
When I first learned about this, I was quite stunned.
This post was published at End Of The American Dream on October 8th, 2014.
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